Foreign players may pour $8 bln into Vietnam shares on market status upgrade: VinaCapital

By Anh Minh
Wed, October 11, 2023 | 10:19 am GMT+7

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.

Dang Hong Quang, director of the Hanoi representative office of VinaCapital. Photo by The Investor/Trong Hieu.

Dang Hong Quang, director of the Hanoi representative office of VinaCapital. Photo by The Investor/Trong Hieu.

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.

Can Van Luc, chief economist at state-controlled BIDV bank. Photo by The Investor/Trong Hieu.

Can Van Luc, chief economist at state-controlled BIDV bank. Photo by The Investor/Trong Hieu.

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.

Phan Duc Hieu, a permanent member of the National Assembly’s Economic Committee. Photo by The Investor/Trong Hieu.

Phan Duc Hieu, a permanent member of the National Assembly’s Economic Committee. Photo by The Investor/Trong Hieu.

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.

Comments (0)
  • Read More
S Korea chaebol Lotte eyes hypermarket in northern Vietnam

S Korea chaebol Lotte eyes hypermarket in northern Vietnam

South Korean conglomerate Lotte is eyeing projects in Thai Nguyen province, an industrial hub in northern Vietnam, firstly a hypermarket.

Industries - Thu, March 27, 2025 | 12:15 pm GMT+7

Dubai-based PDSI eyes $2.6 bln investment in tourism-golf course project in central Vietnam

Dubai-based PDSI eyes $2.6 bln investment in tourism-golf course project in central Vietnam

PDSI Group, a Dubai-based real estate and consulting firm, has expressed interest in developing a $2.6 billion commercial, tourism, and golf course complex in Binh Thuan, a south-central coastal province of Vietnam.

Real Estate - Thu, March 27, 2025 | 11:38 am GMT+7

S Korea's SK set to divest from Vietnam's giant Vingroup

S Korea's SK set to divest from Vietnam's giant Vingroup

South Korean chaebol SK Group is set to divest from Vietnamese conglomerate Vingroup, according to the former’s annual report 2024.

Companies - Thu, March 27, 2025 | 11:30 am GMT+7

StanChart adjusts USD/VND exchange rate forecast amid changing economic trends

StanChart adjusts USD/VND exchange rate forecast amid changing economic trends

Standard Chartered Bank has adjusted its USD/VND exchange rate forecast, reflecting shifts in global and regional economic conditions.

Economy - Thu, March 27, 2025 | 9:29 am GMT+7

Fund inflows help stabilize Vietnam's stock market: analyst

Fund inflows help stabilize Vietnam's stock market: analyst

As fund inflows are typically long-term investments, they play a key role in stabilizing Vietnam's stock market and preventing sharp fluctuations, according to Nguyen Duy Anh, Chartered Financial Analyst (CFA) at Vietcombank Fund Management Co., Ltd. (VCBF).

Finance - Thu, March 27, 2025 | 8:30 am GMT+7

VSIP begins work on industrial park project in northern Vietnam province Thai Binh

VSIP begins work on industrial park project in northern Vietnam province Thai Binh

Construction of the Vietnam-Singapore Industrial Park (VSIP) Thai Binh commenced on Wednesday in northern Vietnam, with the witness of Vietnamese Prime Minister Pham Minh Chinh and his Singaporean counterpart Lawrence Wong.

Industrial real estate - Wed, March 26, 2025 | 10:41 pm GMT+7

Vingroup starts building mega urban project in Vietnam's Mekong Delta

Vingroup starts building mega urban project in Vietnam's Mekong Delta

Vietnam’s leading private conglomerate Vingroup on Wednesday embarked on construction of the VND28 trillion ($1.1 billion) Vinhomes Green City, the first mixed-use urban development in its ecosystem in the Mekong Delta province of Long An.

Real Estate - Wed, March 26, 2025 | 10:11 pm GMT+7

Indonesia, China cooperate in digital technology

Indonesia, China cooperate in digital technology

Indonesia and China are expanding cooperation in the field of AI to promote digital transformation, especially in the fields of agriculture and smart cities.

Southeast Asia - Wed, March 26, 2025 | 10:01 pm GMT+7

Indonesia decides to join BRICS New Development Bank

Indonesia decides to join BRICS New Development Bank

Indonesian President Prabowo Subianto has announced the Government's decision to become a member of the New Development Bank (NDB), a multilateral development bank established by the five founding member states of the BRICS group.

Southeast Asia - Wed, March 26, 2025 | 9:57 pm GMT+7

Major Vietnamese broker SHS to double charter capital

Major Vietnamese broker SHS to double charter capital

Saigon-Hanoi Securities Corporation (SHS) plans to issue 894 million shares to increase its charter capital from VND8.13 trillion to VND17.07 trillion ($667.6 million), making it one of the top three securities firms in term of charter capital.

Companies - Wed, March 26, 2025 | 8:30 pm GMT+7

Elon Musk company okayed to pilot Starlink satellite internet service in Vietnam

Elon Musk company okayed to pilot Starlink satellite internet service in Vietnam

Vietnam has allowed the U.S.'s SpaceX to pilot Starlink low-orbit satellite internet service in the country on a pilot basis until January 1, 2031.

Industries - Wed, March 26, 2025 | 5:18 pm GMT+7

Danish toymaker Lego to open $1.3 bln Vietnam plant next month

Danish toymaker Lego to open $1.3 bln Vietnam plant next month

Denmark's Lego will officially open its factory in VSIP III Industrial Park in Vietnam's southern province of Binh Duong on April 9.

Industries - Wed, March 26, 2025 | 4:18 pm GMT+7

Top Singaporean firms earn high incomes in Vietnam

Top Singaporean firms earn high incomes in Vietnam

Singapore is the second-biggest foreign investor in Vietnam, with over $84 billion in registered investment capital as of end-January and many prominent investors raking in high incomes.

Companies - Wed, March 26, 2025 | 3:45 pm GMT+7

Vietnam, Singapore ink significant deals in Hanoi

Vietnam, Singapore ink significant deals in Hanoi

Vietnamese Prime Minister Pham Minh Chinh and his Singaporean counterpart Lawrence Wong on Wednesday witnessed the signing of many cooperation deals between agencies and enterprises of the two countries.

Economy - Wed, March 26, 2025 | 2:51 pm GMT+7

Vietnam's major policies are reshaping economic development

Vietnam's major policies are reshaping economic development

Major policies are reshaping Vietnam's approach to economic development, which focuses on science, technology, and private enterprises, said a leader at the Vietnam Chamber of Commerce and Industry (VCCI).

Economy - Wed, March 26, 2025 | 12:11 pm GMT+7

PM okays over $10 bln urban area project in central Vietnam

PM okays over $10 bln urban area project in central Vietnam

The over VND260.3 trillion ($10.16 billion) Cam Lam New Urban Area project in the south-central province of Khanh Hoa has received in-principle approval from Prime Minister Pham Minh Chinh.

Real Estate - Wed, March 26, 2025 | 8:58 am GMT+7