Foreign stockmarket investors have always had trouble getting their hands on Vietnamese stocks. But that's changing. The government has decided to lift the legal limit on foreign ownership of listed firms, currently capped at 49%.
In the next few days it is likely to rise to 60% or 65%, while some analysts are hoping that the limits will be removed completely. Sectors the government considered strategic, such as banking, airlines and defence, will not offer controlling stakes to investors, however.
This is a major step forward, says VinaCapital's Andy Ho, who runs the Vietnam Opportunity Fund. Without much foreign money, the market has suffered from a lack of liquidity, which has seen it trade at a 25%-35% discount to its regional peers.
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The new rules will encourage more state-owned firms to list, clearing the backlog in the government's privatisation programme and enticing more foreign investors, who currently only account for 15% of daily turnover. A likely rise in mergers and acquisitions will be an extra attraction. As liquidity improves, volatility should fall.The big picture, meanwhile, is encouraging. GDP grew by 6.3%year-on-year in the second quarter.
The hangover from the China-style bank-lending binge has gone. Manufacturing is doing especially well Vietnam is attracting foreign firms seeking a low-cost alternative to China, notes Capital Economics. A near-100-million population bodes well for long-term consumption. The Vietnam Opportunity Fund (LSE: VOF), which invests in unlisted companies and real estate as well as equities, is on a 20% discount to net asset value.
Andrew is the editor of MoneyWeek magazine. He grew up in Vienna and studied at the University of St Andrews, where he gained a first-class MA in geography & international relations.
After graduating he began to contribute to the foreign page of The Week and soon afterwards joined MoneyWeek at its inception in October 2000. He helped Merryn Somerset Webb establish it as Britain’s best-selling financial magazine, contributing to every section of the publication and specialising in macroeconomics and stockmarkets, before going part-time.
His freelance projects have included a 2009 relaunch of The Pharma Letter, where he covered corporate news and political developments in the German pharmaceuticals market for two years, and a multiyear stint as deputy editor of the Barclays account at Redwood, a marketing agency.
Andrew has been editing MoneyWeek since 2018, and continues to specialise in investment and news in German-speaking countries owing to his fluent command of the language.
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