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Vietnam to lift foreign ownership limit of 49% at state-owned and listed companies

posted onOctober 14, 2018

Hanoi plans to remove 49% foreign ownership cap on listed companies by the end of 2019, as the Asian country aims to see Vietnamese shares become part of the MSCI Emerging Markets Index., an upgrade from the current MSCI Frontier Markets Index. 

The Finance Ministry is drafting an overhaul for the nation's securities law, which was issued in 2006 and amended in 2010, Nikkei Asian Review reported.

Vietnam, the world's 14th-most-populated country and one of Asia's fastest-growing economies, has around 1,500 public companies, including about 740 listed on the two main stock exchanges in Hanoi and Ho Chi Minh City, the commercial capital. More than 780 public companies are listed on a second-tier market or remained unlisted. 

However, the quality of their offerings vary widely. Some are undeveloped, and many stocks are not considered tradable, according to Vietnam News.

Foreign investors now hold no more than a 49% stake in a public company in general, while foreign ownership in sectors such as banking and aviation is capped at 30%.

The proposed change, which is expected to bring an influx of capital into local exchanges, would allow foreign investors to acquire a majority stake in public companies in sectors not considered critical to national security. 

These include privately owned listed companies and state-owned enterprises that were privatised, with or without listing on the stock markets. 

The move would leave decisions on foreign ownership in the hands of managers and shareholders. 

Foreign portfolio investment in local stock markets was US$34.2 billion at the end of July.  As of Sept.30, foreign investors owned 23.33% of Vietnamese stocks.

In Vietnam, foreign investors are entitled to conduct unrestricted investment in government bonds, government guaranteed bonds, local authority bonds, enterprise bonds, certificates of securities investment funds, shares of securities investment companies, shares without voting rights of public companies, derivative securities, and depository receipts, except when the laws or the issuing organisations have some other provisions.

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