Vietnam opens stock market for higher foreign participation, expedited IPOs
The South-east Asian country is striving for an upgrade from frontier to emerging-market status by the end of 2025
[HO CHI MINH CITY] Vietnam has further opened its stock market through a series of reforms, including enabling higher foreign ownership and accelerating initial public offerings (IPOs), marking a step towards greater efficiency and an emerging-market upgrade.
A decree effective from Thursday (Sep 11) removes the option for public firms to unilaterally set foreign ownership caps lower than the thresholds allowed by law and international commitments. Previously established lower caps can be retained or raised, but cannot be lowered.
“(The amendments) ensure compliance with the maximum market openness permitted by investment law and reduce risks for foreign investors in case of new developments impacting the companies,” said the Vietnamese Ministry of Finance in an explanatory document for the new decree.
Vietnam currently sets varying foreign ownership caps based on industry and company type. For most restricted sectors, this is set at 50 per cent of a company’s charter capital, while certain strategic industries such as banking and airline have stricter limits.
Earlier in March, the Vietnamese government allowed private banks that acquire struggling financial institutions to raise foreign ownership limits from the previous cap of 30 per cent to as high as 49 per cent.
Nguyen The Minh, head of research and development at Yuanta Securities Vietnam, noted that around 35 per cent of the approximately 1,600 stocks across Vietnam’s three exchanges have foreign ownership levels below the allowed caps.
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“The increase in available foreign room can be substantial, but the question remains whether foreign investors will be interested if the market lacks quality offerings,” he added.
The newly issued decree is expected to partly address this issue by streamlining the IPO process and reducing the listing timeline from 90 days to 30, enabling the trading of shares to start sooner.
“This removes barriers for companies that previously faced prolonged listing delays and missed out on favourable market cycles,” said Minh.
Stronger upgrade prospects
Vietnam is striving to upgrade its stock market – the smallest among major South-east Asian economies – from frontier to emerging-market status by the end of this year.
It has been on global index provider FTSE’s watch list for reclassification since 2018 and is poised for an updated review this October.
However, Vietnam’s inclusion in MSCI’s emerging-market indices, which are benchmarked by the majority of global funds, still faces hurdles, including restrictions on foreign ownership.
In its June review, MSCI noted that companies in certain conditional and sensitive sectors remain subject to foreign ownership limits ranging from 0 to 75 per cent, impacting more than 10 per cent of the Vietnamese equity market.
“(The latest reforms) will draw greater foreign interest over time and support broader upgrade prospects beyond FTSE,” said Tyler Nguyen, chief market strategist at Ho Chi Minh City Securities Corporation.
Other regulatory changes under the new decree are also expected to enhance foreign investor participation, including simplified trading code issuance and the allocation of two trading codes for foreign fund managers to optimise management and oversight.
Vietnam’s non-prefunding rule has also been further clarified. Last November, authorities scrapped a prefunding requirement, under which foreign institutional investors had to deposit full funds before placing buy orders; this reduced capital efficiency and made Vietnam less attractive than other markets.
The deadline for the full implementation of the central clearing counterparty mechanism – which supports making non-prefunding both feasible and safe – is set for the end of 2027, with plans to begin as early as the first quarter of that year.
Vietnam’s new trading system, known as KRX, was launched in May, enabling a wide range of advanced features to align with international standards.
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