Media Coverage
Vietnam seeks emerging market status (Vietnam Investment Review, July 2015)

Lifting the foreign ownership cap will pave the way for Vietnam to achieve the much sought-after “Emerging Market” status.

Vietnam seeks emerging market status


Lifting the foreign ownership cap will pave the way for Vietnam to achieve the much sought-after “Emerging Market” status.



Last year, the country launched a campaign to upgrade its status from “frontier” to “emerging market”. However, Morgan Stanley Capital International, which publishes the index, refused to consider Vietnam for an upgrade unless it eased up on foreign ownership limits.


“Foreign ownership limits on listed companies have been a major hurdle to capital markets, deterring many foreign investors,” said Andy Ho, chief investment officer at VinaCapital in Ho Chi Minh City, adding that the limits had effectively capped the level of foreign participation and depressed valuations, so there has been much anticipation regarding its retraction.


The proposal to ease the cap has been deliberated persistently over the last two years, and has finally received the government’s thumbs-up. With the market opened and the cap now removed, Vietnam is expecting a wave of foreign capital inflows and improvement to the local market’s liquidity.


“We think that this will open the door to private foreign owned companies to list on Vietnam’s stock exchanges. Just imagine having Unilever Vietnam listed on the stock exchange. That would be great, and it isn’t impossible, given that Unilever has been listed in many regional markets already,” said Michel Tosto, head of institutional sales and brokerage at Ho Chi Minh City-based Viet Capital Securities.


Local market capitalisation currently captures approximately $60 billion, while the average market capitalisation across emerging markets stands at $550 billion. The average daily trading volume in Vietnam is recorded at $100 million, and foreign participation is at roughly 20-25 per cent.


There are now around 30 companies in the local market whose foreign ownership has reached the 49 per cent threshold, like FPT Corporation, DHG Pharmaceutical, Vietnam Dairy Products, and a dozen others that have almost reached the limit.  The combined market capitalisation of the 30 companies is currently recorded at $10.2 billion, or equivalent to 17 per cent of the total market capitalisation.


 “Decree 60 now clears the way for Vietnam to qualify for Emerging Market status, and given the MSCI Emerging Markets Index attracts $1.4 trillion worth of investments, Vietnam’s eventual inclusion could provide a further upside of 15-20 per cent to investors,” added Ho. 


Since the beginning of the year, the VN Index rose 8.5 per cent, while the MSCI Frontier Markets Index dropped 5.9 per cent.


Vietnam has attained a stable growth rate of 6.2 per cent for the first half of the year, compared to the 5.98 per cent growth rate at the end of 2014. With the latest development in the foreign ownership regulation, the country is clearly doing its best to boost participation of foreign investors in its financial market, which in turn, will promise sustainable growth in the future.  


While the new decree will not come into force until September 1, securities companies can already apply to the State Securities Commission, the Vietnam Securities Depository, and the stock exchanges for the foreign ownership expansion.


Meanwhile, the Ministry of Planning and Investment will be issuing a complete list of conditional investment sectors in the next couple of months, in order to provide a guideline for foreign investors investing in companies that are not listed in Vietnam.


Thieu Thi Nhat Le - Vietnam Asset Management’s chief representative

The framework for opening the foreign ownership limit set by Decree 60 is certainly applauded by foreign institutional investors, including Vietnam Asset Management (VAM). We hope guidelines and supporting documents will be issued soon by regulators for an effective implementation on September 1, to really increase room for foreign investors.

We think if the decree is carried out properly, it will attract more foreign inflows to the stock market in the future, especially now, when Vietnam’s economy is showing signs of strong economic recovery and macro stability.


Alan Pham – VinaCapital’s chief economist

Interest from foreign investors is keen.  They have waited for this policy change for many years.  It has created excitement among our clients.  With a larger foreign ownership limit (FOL), they can have more say in governance matters.  This is a major motivating force for their further participation in the Vietnamese market.

The FOL expansion is definitely a major development toward boosting the activities of local markets.  A larger volume of shares and diversity will become available to investors.  The total market capitalization will rise significantly from the current ratio to GDP, making Vietnam more competitive with other ASEAN nations in this regard.  M&A activities will pick up as investors who hold shares in companies with different FOL’s will try to diversify their portfolios.


Nguyen The Phuong - FPT Corporation’s deputy general director

At FPT, we have always strived for the expansion of the foreign ownership limit. Since the new decree came out, many investment funds have contacted us to find out how we will carry out lifting the cap.

At this point, we are in discussions with authorities trying to ascertain specific information on the regulations and implementation of Decree 60. Personally speaking, I think it is an open policy that is great for businesses and will help create many opportunities to entice foreign capital investment.


Le Quoc Binh - Ho Chi Minh City Infrastructure Investment’s (CII) general director

Lifting the foreign ownership cap is a good prospect for raising capital. We are all geared up to take advantage of the eased-up regulation and we are, in fact, waiting for the circular to come out to guide Decree 60 so that we can officially push our foreign ownership limit up to 60 per cent  in our company charter.

We have been in long-term co-operation with a number of foreign investors such as Dragon Capital, Goldman Sachs, and Vietnam Omen Investment. The benefits that they have brought us are not just limited to the investment capital but expanded to corporate management experience, fund mobilising techniques and reputation.


Phan Dung Khanh - Maybank Kim Eng Securities’ head of investment advisory

Securities tickers have positively responded to the new decree in recent trading sessions, in anticipation that foreign investors can invest up to 100 per cent in securities companies.

Authorities should therefore quickly refine the definition of businesses that foreign investors are allowed to invest 100 per cent in, or are limited to invest in. Once made clear, the regulations will definitely tempt foreign capital inflows into many potential business tickers, and in turn also stimulate the domestic sectors to vigorously inject capital into the local market.


By Trang Nguyen