News

Vietnam decree paves way for EM status

Emerging markets sign1A long-awaited decree to raise foreign ownership limits in Vietnam may pave the way for the country to gain emerging market status from index compiler MSCI.

The decree will lift the foreign ownership cap from 49% to 100% in many sectors, while giving companies the right to propose their own limits. A foreign ownership limit of 30% for bank stocks will be retained.

Andy Ho, chief investment officer of Vietnam-based VinaCapital, which manages $1.4 billion, says the new rules will make the Vietnamese market more competitive and accessible.

"The liquidity gap will close, volatility will reduce, and renewed interest in the privatisation programme will deepen the market," he says.

Foreign ownership limits are one of the factors index compiler MSCI examines when it decides whether to add countries to its widely followed Emerging Markets index.

In the past, foreign investors have reported being unable to buy shares in popular Vietnam-listed companies such as Vinamilk, a dairy company, because foreign ownership was at or close to 49%.

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