MSCI flags remaining weaknesses in Vietnam’s stock market despite reform progress

Vietnam continued to advance a series of capital market reforms over the past year, but key barriers related to foreign ownership limits, market accessibility, disclosure standards, and settlement infrastructure remain obstacles to a potential market status upgrade, according to MSCI’s latest Global Market Accessibility Review.

The index provider acknowledged several important regulatory improvements made by Vietnam during the review period, including the introduction of a global broker trading model that allows foreign investors to access the market without opening a domestic trading account, the establishment of a Central Counterparty (CCP) clearing company expected to become operational in early 2027, and ongoing implementation of mandatory English-language disclosures.

Vietnamese authorities have also moved to address long-standing concerns over foreign ownership restrictions. New regulations prohibit listed companies from voluntarily setting foreign ownership limits below legal thresholds, while public companies will be required to disclose their applicable foreign ownership limits by September 2026. Regulators are also considering further liberalization in several sectors.

Despite these efforts, MSCI said a number of structural issues continue to weigh on the accessibility of Vietnam’s equity market.

MSCI noted that foreign ownership limits remain one of the most significant challenges for international investors. Companies in certain conditional and sensitive sectors are subject to foreign ownership limits ranging from zero to 7%.

These limitations still affect more than 10% of the Vietnamese equity market. Recent regulations prohibit companies from self-imposing foreign ownership limits below the legal maximum and require public companies to disclose applicable limits by September 2026.

In addition, more than 1% of the MSCI Vietnam Investable Market Index (IMI) is currently impacted by limited foreign room availability, restricting foreign investors’ ability to increase holdings in certain stocks.

The index provider also highlighted that foreign investors do not always enjoy the same practical access to information as domestic investors, partly because corporate disclosures are often unavailable in English and partly because ownership restrictions continue to limit shareholder rights.

While Vietnam’s Ministry of Finance has launched a phased roadmap requiring public companies to publish information in English between January 2025 and January 2028, MSCI said information disclosure remains inconsistent. Corporate announcements are not always available in English and, in some cases, lack sufficient detail for international investors.

The report also noted that not all market regulations are published in English, creating additional challenges for foreign institutions attempting to navigate Vietnam’s regulatory framework.

MSCI further warned that Vietnam’s relatively low free-float market structure raises concerns regarding investability, transparency, and price discovery in certain stocks.

MSCI identified continued limitations in Vietnam’s foreign exchange market as another area requiring improvement. Vietnam does not have an offshore currency market, while onshore foreign exchange transactions remain subject to restrictions, including requirements that currency transactions be linked directly to securities trading activities.

The investor registration process also remains relatively cumbersome. Foreign investors must still complete mandatory registration procedures and obtain approval from the Vietnam Securities Depository and Clearing Corporation (VSDC) before opening trading accounts.

On post-trade infrastructure, MSCI acknowledged Vietnam’s introduction of a temporary non-prefunding mechanism but noted that a full international-standard settlement framework will only be achieved after the CCP model is fully implemented, currently targeted for 2027.

The report also pointed out that Vietnam lacks overdraft facilities during settlement, a feature commonly available in more developed markets.

One area where MSCI observed notable improvement was transferability. Recent regulatory changes have expanded the types of off-exchange transactions and in-kind transfers that can be executed without prior regulatory approval. As a result, transaction volumes in these categories have increased significantly in recent years.

However, MSCI noted that the VSDC still typically requires several days to review supporting documentation before such transactions can be completed.