Foreign investors to be allowed to trade stocks in Vietnam without pre-funding: draft circular
Foreign institutional investors will not have to deposit 100% of the transaction value before trading stocks in Vietnam, according to a draft circular.
The draft circular amending and supplementing a number of articles of circulars on securities transactions on the stock trading system; clearing and settlement of securities transactions; operations of securities companies and information disclosure on the stock market has just been released by the State Securities Commission (SSC) for public feedback.

Six months ahead of the market status upgrade is the best time to buy stocks, say experts. Photo by The Investor/Trong Hieu.
Under the circular, securities companies will be responsible for evaluating customer capacity to determine the pre-funding rate under the signed contract and make up for the shortfall via a self-directed brokerage account if the customer does not pay in full.
The securities company can sell shares as soon as they come to the self-directed brokerage account. Differences arising will be settled according to the contract signed by the two parties.
The bank where the foreign institutional investor opens a securities depository account is responsible for paying the shortfall in the case of incorrect confirmation of the customer's deposit balance, leading to a lack of money to pay for securities transactions.
In necessary cases, to stabilize the market, the SSC has the right to temporarily suspend foreign institutional investors’ trading without 100% pre-funding.
According to the SSC, the requirement for 100% pre-funding before trading ensures safety but makes foreign investors miss investment opportunities if they cannot transfer money in time or lose fees when they cannot buy shares.
In addition, foreign investors also suffer losses due to frozen capital during the time of transferring money to Vietnam without successful transactions, and risks related to exchange rate fluctuations.
This has become one of two major bottlenecks preventing the Vietnamese stock market status from being upgraded from a “frontier” to an “emerging” market, said the commission.
At a conference entitled “Vietnam stock market: status upgrade and transparency in listed firms’ information disclosure” held by The Investor in October 2023, economist Vo Tri Thanh, director of the Institute for Brand and Competitiveness Strategy, said transactions in the financial market, especially large transactions by foreign investors, have a huge spillover impact. Therefore, unfinished transactions affect not only the securities company where the order is placed, but also market sentiment.
Meanwhile, Dr. Can Van Luc, chief economist at Hanoi-based BIDV bank, said in the case of no pre-funding, the rate of investors around the world who do not pay is only 2%, equivalent to a loss of $3 billion per year.
Therefore, Luc advocated increasing the power given to securities companies to assess risks and make their own decisions. This proposal is supported by the majority of securities companies who are confident in their own risk management capabilities.
The government's current goal is to have the stock market upgraded before 2025, said Pham Thi Thuy Linh, deputy director of the SSC’s market development department.
Vietnam has met seven out of nine criteria for the market status upgrade. The two remaining criteria are 100% pre-funding and the ownership ratio cap for foreign investors, she said.
According to Maybank Investment Bank (MSVN), market access including information disclosure in English and raising the foreign ownership limit (FOL) are the main obstacles to the upgrade of Vietnam's stock market. The FOL issue can be resolved through the introduction of non-voting depository receipts (NVDR), which was included in the new Securities Law in 2021.
The stock market often performs positively before being upgraded, MSVN recommends that investors should seize the opportunity to participate in the market early. The appropriate time to buy stocks is about six months before the official market status upgrade.
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