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Vietnam delays plan to ease restrictions on foreign shareholders
International investors will have to wait at least 10 months for Vietnam to ease curbs on foreign shareholders after a 2013 proposal to increase ownership limits was shelved.
Policy makers must revise a Ministry of Finance plan that recommended lifting the foreign cap on voting shares in some industries to 60 percent from 49 percent, Vu Bang, chairman of the State Securities Commission, said in an interview on Nov. 28. Bang, who had said in February that the government was in the “last stage” of making a decision on the proposal, now says a new version will be submitted in October.
Speculation that ownership limits for the $56 billion stock market would be raised helped boost the benchmark VN Index (VNINDEX) by 22 percent in 2013 and another 12 percent this year. Money managers including Templeton Asset Management and Dragon Capital Group Ltd. have said they’re unable to buy as many shares as they want because of the caps.
“This is disappointing as the market has been rallying because investors were expecting the increase in the limit this year,” Attila Vajda, managing director at Project Asia Research & Consulting Pte., said from Ho Chi Minh City on Nov. 28. It will probably take until 2016 at the earliest for a revised plan to get final approval, Vajda said.
The SSC will work with relevant ministries to revise the plan and address inconsistencies with existing laws, Bang said. He said an increase in foreign limits will be implemented “eventually” while declining to provide details of the new proposal. The plan will need approval from Prime Minister Nguyen Tan Dung.
MSCI Status
Vietnam is building its case for an upgrade to emerging-market status from frontier classification by index provider MSCI Inc., the SSC said in October. An emerging-market ranking, which would increase the pool of eligible investors for Vietnam, requires “significant” openness to foreign ownership and ease of capital flows, as well as minimum levels of liquidity and market value, according to MSCI’s website.
Foreign investors have added a net $131.9 million to their Vietnam holdings in 2014, set for the ninth straight year of inflows. The government is forecasting the fastest economic growth since 2011 amid accelerating exports, a widening trade surplus and slowing inflation.
Lawmakers approved legislation last week that allows broader foreign ownership of property, stepping up efforts to reach a 5.8 percent target for economic expansion this year and clear up bad debts tied to real estate.
Despite the delay in new foreign ownership rules, Bang said Vietnam’s stock market will probably keep rallying next year amid a stable economy.
An average $98 million of securities traded daily this year on the Ho Chi Minh City Stock Exchange, the country’s main bourse, compared with $47 million last year, according to data compiled by Bloomberg. The VN index is valued at 12.3 times estimated earnings for the next 12 months, versus 13 times for the MSCI Asia Pacific Index.
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