The ongoing revision of Vietnam’s securities law is expected to remove restriction for foreign ownership limit at local companies.
Despite global uncertainties in the first five months of 2019, Vietnam’s stock market witnessed strong foreign cash inflows with overseas investors’ net purchases reaching VND9.03 trillion (US$388.7 million).
In May, which is usually considered an unlucky month for investors, foreign players bought in 450.5 million of local shares worth VND23.50 trillion (US$1.01 billion), while selling other 467 million worth VND19.5 trillion (US$839.46 million). Despite a net sale of 16.7 million shares, foreign investors recorded net buy value of VND4.01 trillion (US$172.61 million).
Notably, the Ho Chi Minh City Stock Exchange (HoSE) posted net purchase of foreign investors of VND3.79 trillion (US$163.14 million), representing a six-fold month-on-month increase.
As of present, net purchase of foreign investors in HoSE reached VND9.32 trillion (US$401.24 million), indicating a positive sign amid strong volatility in Vietnam’s stock market, which is on the declining trend recently.
The result marked a 9th consecutive month of foreign investors’ net purchase since last September, standing at VND21.2 trillion (US$912.7 million) in net value.
Stocks that received strong interests from foreign investors included those of Vingroup, Bao Viet Holdings, Petrolimex, and Vietnam Airlines, among others. In May, South Korea’s conglomerate SK Group agreed to buy a 6.1% stake of Vietnam’s largest privately-run Vingroup for US$1 billion.
On the Hanoi Stock Exchange (HNX), foreign investors reverted to a net sale of VND270 billion (US$11.6 million), accumulating a total of VND293 billion (US$12.61 million) in the five-month period.
Additionally, during the January – May period, 3,160 projects have had a record high of US$7.65 billion in capital contributed by foreign investors in local companies, an increase of 2.8-fold year-on-year and accounting for 45.7% of total registered capital.
Opportunities for foreign investors
The ongoing revision of Vietnam’s securities law is expected to remove restriction for foreign ownership limit at local companies, while currently only a handful of public companies opts for no cap in foreign ownership.
Nguyen Thi Viet Ha, member of board of directors at the Ho Chi Minh Stock Exchange (HoSE), said that out of the total 376 HoSE-listed companies, only 25 have no restriction on foreign ownership ratio, three with foreign ownership cap from 51 – 70%, 317 with 49%, eight with 30% and 23 with less than 51%.
Ha pointed to three reasons behind companies’ decision of not lifting foreign ownership limit (FOL) to 100%, including the difficulties in determining conditional business lines and complicated procedures.
Secondly, companies with 51% foreign holding would be considered foreign-invested companies, thus facing restriction for operation in accordance with the Law on Investment, especially in fields of healthcare and IT.
Thirdly, there remains preference among local companies to maintain major voting rights for domestic investors.
Dong A Securities in its report suggested the new securities law would present opportunities for greater integration of Vietnam’s stock market in the global market.
The country’s stock market is on track for possible reclassification by FTSE Russell in September, stated the report.