Vietnam flings open its doors to foreign investors

The Vietnamese government has decided to lift the legal limit on foreign ownership of listed firms.

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.

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.

Recommended

Vietnam makes its mark on the global stage
Emerging markets

Vietnam makes its mark on the global stage

Electronics manufacturers are moving into Vietnam, partly in response to manufacturing delays caused by lockdowns in China. The country’s textile indu…
30 Jun 2022
Fortress Russia’s economy is crumbling
Global Economy

Fortress Russia’s economy is crumbling

Vladimir Putin invaded Ukraine in the belief that the Russian economy could withstand whatever the West threw at it. That belief is being severely tes…
12 Jun 2022
Why the outlook for emerging markets is improving after years of underperformance
Investments

Why the outlook for emerging markets is improving after years of underperformance

Emerging markets have underperformed over the past decade. Alex Rankine explains what the outlook is.
5 Jun 2022
What's behind Sri Lanka’s crippling debt crisis?
Emerging markets

What's behind Sri Lanka’s crippling debt crisis?

Sri Lanka has been hit by a triple whammy of economic shocks and has gone to the IMF for a bailout. It may just be the first domino to fall in a globa…
20 May 2022

Most Popular

UK house prices are definitely cooling off – but are they heading for a fall?
House prices

UK house prices are definitely cooling off – but are they heading for a fall?

UK house prices hit a fresh high in June, but as interest rates start to rise, the market is cooling John Stepek assesses just how much of an effect h…
30 Jun 2022
The ten highest dividend yields in the FTSE 100
Income investing

The ten highest dividend yields in the FTSE 100

Rupert Hargreaves looks at the FTSE 100’s top yielding stocks for income investors to consider.
22 Jun 2022
Gold has been incredibly boring to own – but that’s no bad thing right now
Gold

Gold has been incredibly boring to own – but that’s no bad thing right now

Stocks, bonds and cryptocurrencies have all seen big falls this year. But gold remains at its one-year average. It may be dull, but it’s doing what it…
29 Jun 2022