Vietnam's stock market to remove foreign investment cap

This long awaited and unprecedented change has attracted huge interest from investors and experts alike. We’ll learn more about the new regulation, in this week's edition of Vietnam in Close up.

Voting shares held by overseas investors used to be subject to a 49 percent ownership cap. 31 companies were reported to have met this limitation, including the most profitable stocks, such as FPT, REE, SSI, and Vinamilk that account for 30 percent of the market’s total capitalisation value.

Under Decree 60 foreign stakes can now increase to 100 per cent in certain business sectors.

Dinh Tien Dung, Minister of Finance said: In addition to securities companies,100 percent foreign ownership is allowed in insurance companies. Conditional business sectors are those that provide services for national security and defence. We'll continue to apply limits to these businesses. Opportunities will be opened for foreign investment to flow indirectly into the market and accelerate the reform of financial and monetary markets in the future.

Decree 60 specifies that the foreign ownership cap will be completely removed for government, municipal, and enterprise bond holders. In addition, no limitations will be applied to foreign investment funds of security indices, derivatives, depository notes, or to securities companies and public companies.

Nguyen Quang Viet, Head, Legal Department, State Securities Commission (SSC) said: The decree states that any international treaties regulating an ownership cap to which Vietnam is committed to remain in force. In cases of public firms operating in business sectors that have specific limits for a foreign ownership cap, those requirements still apply. In cases of firms operating in conditional business sectors that do not specify a foreign ownership cap, the limit remains at 49 percent. In cases of firms operating in business sectors that have varied requirements for foreign ownership caps, the lowest limit applies unless international treaties state otherwise. In other cases, foreign ownership is not subject to limitation unless the company's treaties state otherwise. 

On August 19, Ministry of Finance issued Circular 123 providing specific guidance on the necessary procedures foreign investors must take to operate in Vietnam’s stock exchange.

According to market experts, the circular has stipulated important changes in administrative procedures for foreign investors.

Tran Minh Hoang, Senior Analyst, Research Department, VCBS said: We consider this move as a very positive policy change in terms of supporting market development as well as complying with international market conditions. However, there still remain several issues in implementing Decree 60 as this is an unprecedented regulation in Vietnam.

Nguyen Xuan Binh, Vice Director, Analysis Department, Bao Viet Securities said: There is another important issue which is still pending approval from the Ministry of Planning and Investment.  That is the list of unconditional business sectors, specifying foreign ownership limitations for certain sectors. This is actually the most awaited information among market investors.

According to the State Securities Commission, Decree 60 is in principle a fundamental document only, not a specific regulation. It will open up space and time to complement policy developments in many specific sectors including the securities market. It is estimated that as a result of Decree 60, some US$10 billion dollars’ worth of stocks will be available for trade to foreign investors.