Foreign players may pour $8 bln into Vietnam shares on market status upgrade: VinaCapital
Foreign investors will likely put between $5 billion and $8 billion into Vietnamese securities if the local stock market is elevated to an emerging one from its current frontier status, a VinaCapital executive has said.
The figures correspond to 0.7-1.2% of the emerging market indexes managed by MSCI and FTSE Russell, said Dang Hong Quang, director of the Hanoi representative office of VinaCapital, one of the leading fund managers in Vietnam, at a conference held by The Investor in Hanoi on Tuesday.
An upgrade would also help deepen the stock market by attracting highly stable foreign inflows as retail investors now account for more than 90% of traders, Quang added.
The executive noted that the upgrade would also help lure pension funds that are shifting away from Chinese markets due to heightened U.S.-China tensions and large institutional investors that are seeking potential alternative destinations.
Quang noted that Vietnam has outsized other peers that are included in emerging market indexes in terms of market capitalization and liquidity. Companies listed on the Ho Chi Minh Stock Exchange (HoSE) had a combined market cap of $190 billion as of end-September, larger than the Philippines, Qatar and Kuwait and approaching Malaysia. In addition, daily transaction values are only behind Indonesia in the ASEAN bloc.
“In terms of GDP and stock market size, Vietnam totally deserves to be classified among emerging markets,” Quang stressed.
Steve Brown, head of institutional sales at VPS Securities, forecast transaction volumes to double or jump five-fold if Vietnam’s stock market is upgraded to an MSCI Emerging Market. Foreign inflows would rise an estimated $1-5 billion a year.
Hurdles to upgrade
The VinaCapital executive pointed out two main criteria that the Vietnamese stock market needs to meet to be upgraded – foreign ownership limit (FOL) and prefunding.
As per the FOL, under current legislation, foreign investors are not allowed to invest in 25 business lines and have limited access to 59 others. VinaCapital suggested cutting short that list.
In addition, the introduction of Non-Voting Depositary Receipt (NVDR) would help overseas players invest in companies that have reached their FOL ceilings.
Regarding the prefunding issue, the KRX system, a trading platform provided by the Korea Exchange for the HoSE, is scheduled to go live in December this year. Once the KRX system becomes operational, securities companies will work with other parties to solve the issue of having foreign investors deposit 100% of the money to purchase shares.
In the longer term, the Central Counterparty Clearing House (CCP) will technically clear the prefunding requirement, Quang said.
Speaking at the event, Can Van Luc, chief economist at state-controlled BIDV bank, cited a survey as saying that just 2% of investors worldwide do not fulfil their payment obligations in stock trading.
To solve the prefunding problem, Luc put forward three measures. They are upgrading the information technology system; implementing fines for violating investors; and authorizing securities companies to measure the risks themselves and decide whether to request their clients to deposit in advance.
Policy actions
Phan Duc Hieu, a permanent member of the National Assembly’s Economic Committee, urged the Ministry of Finance and the State Securities Commission (SSC), the stock market watchdog, to form an action plan to facilitate the status upgrade soon.
He proposed three levels of policy actions. First, the Vietnamese government needs to make legal adjustments regarding the clearing mechanism and the portfolio that is subject to FOL.
Second, the government should make full use of the current legal corridor while awaiting amendments. For example, authorities need to regularly update information on the FOL-restricted portfolio and make it more accessible. In addition, listed companies should be required to announce the FOL themselves instead of it being optional.
Third, as a bottom-to-top approach, listed companies should be more active in disclosing information that can impact investors beyond what they are required to do. In this regard, the SSC should take the initiative.
- Read More
Vietnam high-speed railway should run beyond Hanoi, HCMC on either side: lawmakers
Vietnam’s mega North-South high-speed railway project should be redesigned and extended beyond Hanoi and Ho Chi Minh City as currently planned, several lawmakers have suggested.
Infrastructure - Thu, November 21, 2024 | 6:11 pm GMT+7
Vietnam-Malaysia relationship upgraded to comprehensive strategic partnership
Vietnam and Malaysia have upgraded their relationship to a comprehensive strategic partnership, the highest level in the former’s diplomatic hierarchy.
Politics - Thu, November 21, 2024 | 5:21 pm GMT+7
Petrovietnam units sign LNG supply deal for trial run of Vietnam’s first LNG power plants
PV Power and PV Gas, two units of state-owned Petrovietnam, have signed an LNG supply deal for trial operation of Nhon Trach 3 and Nhon Trach 4, Vietnam’s first LNG-to-power plants.
Energy - Thu, November 21, 2024 | 4:40 pm GMT+7
Sufficient first phase funds ensured for Vietnam’s new mega airport: transport minister
Minister of Transport Nguyen Van Thang affirmed Wednesday that funding would be secured for building the Long Thanh International Airport, set to become Vietnam’s biggest.
Infrastructure - Thu, November 21, 2024 | 3:53 pm GMT+7
VAFIE to organize workshop on amendments to horse racing, football betting rules
The Vietnam’s Association of Foreign Invested Enterprises (VAFIE) and The Investor will organize a workshop on suggestions to amend the government’s Decree 06 on horse racing, greyhound racing and international football betting services.
Economy - Thu, November 21, 2024 | 2:38 pm GMT+7
Vietnam Politburo okays international, regional financial centers in HCMC, Danang
Vietnam’s highest decision-making body, the Politburo, has greenlighted the establishment of an international financial center in Ho Chi Minh City and a regional financial center in the central city of Danang.
Economy - Thu, November 21, 2024 | 1:50 pm GMT+7
Singapore's Platinum Victory seeks to gain veto at Vietnam’s REE
Singaporean fund Platinum Victory Pte. Ltd. has registered to buy more shares of Ho Chi Minh City-based utility firm Refrigeration Electrical Engineering Corporation (REE) to achieve the vetoing power in the latter.
Finance - Thu, November 21, 2024 | 11:29 am GMT+7
Posco keen on investing in Vietnam's $2.2 bln LNG power project
South Korea’s steelmaker Posco is eyeing to invest in the $2.2 billion Quynh Lap LNG-fired power plant project in Vietnam’s central province of Nghe An.
Energy - Thu, November 21, 2024 | 10:42 am GMT+7
Vietnam firm Hoa Lam to build $212 mln Aeon Mall in Mekong Delta
The Mekong Delta city of Can Tho has accepted a subsidiary of private multi-sector Hoa Lam Group as the investor of the Aeon Mall Can Tho commerce and service center.
Industries - Thu, November 21, 2024 | 10:31 am GMT+7
Vietnam startup expert closes Monkey in Black coffee shop
Tung BT (Tran Thanh Tung), a popular startup expert and social media influencer, is closing his final coffee shop in Ho Chi Minh City, ending a 10-year journey of the "Monkey in Black" brand.
Companies - Thu, November 21, 2024 | 8:16 am GMT+7
Vietnam-Singapore ties set for elevation to comprehensive strategic partnership
Vietnam and Singapore will elevate bilateral ties to a comprehensive strategic partnership and Singaporean Prime Minister Lawrence Wong will visit Vietnam next year.
Politics - Wed, November 20, 2024 | 8:16 pm GMT+7
Vietnam’s Vingroup establishes robotics firms, with co-founder’s 2 sons as major shareholders
Vingroup, Vietnam’s largest private conglomerate by ecosystem, has set up a robotics unit as it moves to ramp up its industrial-high technology ecosystem.
Companies - Wed, November 20, 2024 | 6:17 pm GMT+7
E-commerce, digital platforms likely to pay taxes on behalf of their sellers in Vietnam
E-commerce and digital platforms will have to declare and pay taxes on behalf of their sellers starting January 1, 2025, according to a draft amendment to the Law on Tax Administration.
Finance - Wed, November 20, 2024 | 5:37 pm GMT+7
Flexibility, adaptability key to effective leadership: PepsiCo Vietnam exec
In a rapidly changing world, leaders need to develop the skill of being “as flexible as seaweed,” says Nguyen Viet Ha, general director of PepsiCo Foods Vietnam.
Companies - Wed, November 20, 2024 | 3:52 pm GMT+7
Central Vietnam province okays $88 mln automobile part project
Binh Thuan province's industrial zone authority on Tuesday granted an investment registration certificate to a $88 million project invested by Taiwan’s NeoSCM Limited.
Industries - Wed, November 20, 2024 | 3:44 pm GMT+7
Thai packaging firm Thantawan Industry makes inroad into Vietnam
Thantawan Industry Public Company Limited, a leading Thai manufacturer of premium plastic packaging, has inked a deal for a 30-year factory lease, marking its inaugural investment in Vietnam.
Industries - Wed, November 20, 2024 | 3:34 pm GMT+7
- Consulting
-
Remove roadblocks to lure foreign investment into Vietnam: HSBC exec
-
Rethinking resilience: How typhoon Yagi redefines supply chain strategies in northern Vietnam
-
In trade and investment, ASEAN and China are better together
-
AI can be a game changer for Vietnam tourism
-
Investment opportunities in LNG-to-power projects in Vietnam
-
Pepper prices 2024: will the dream of 'black gold' repeat?