South Korean diplomat urges Vietnam to relax curbs on foreign ownership

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A South Korean diplomat in Vietnam on Wednesday urged regulators in the Southeast Asian country to consider relaxing rules limiting foreign ownership and making shares in local companies more accessible to investors.

Vietnam is determined to have its main Ho Chi Minh City stock exchange upgraded from frontier status to an emerging market by 2025, which would attract hefty capital inflows, but the country’s strict limits on foreign ownership in certain sectors remain one of the key hurdles.

“Vietnam can apply non-voting depository receipts (NVDR) to ease foreign ownership limits and increase access to foreign investors,” Yoon Sang-key, South Korean Minister-Counselor to Vietnam, told a conference hosted by the government.

“The Vietnamese stock market can attract more foreign capital through loosening foreign ownership limits, providing equal rights for foreign investors, liberalising the foreign exchange market and publishing market regulations in English,” Yoon added.

South Korean firms are among the biggest foreign investors in Vietnam and a key source of manufacturing jobs in the country. SK Group and Hana Bank have large investments in conglomerate Vingroup and the Bank for Investment and Development of Vietnam.

For banks, foreign ownership cannot exceed 30 percent.

Vietnam’s stock market is running ahead of its neighbours, having risen almost 11 percent so far this year, but it remains the smallest among the main Southeast Asian economies. Being classified as a frontier market prevents many funds, investors and family offices from investing in companies listed in the country.

“If the foreign ownership limit remains, Vietnam will likely only receive a maximum net capital inflow of $5 billion,” Senior Financial Sector Specialist of World Bank Ketut Ariadi Kusuma said.

“But if it is fully resolved, Vietnam’s share in the emerging market index could increase by more than 1 percent and this could bring in an additional $8 to $15 billion.”

At Wednesday’s event, fund and bank managers also urged regulators to quickly establish a clearing house which can solve the current pre-transaction deposit requirements problem, another factor that has hampered the upgrade process.

Prime Minister Pham Minh Chinh told the conference the country was still determined to get the emerging market upgrade from equity index managers MSCI and FTSE in 2025.

He said in a statement later that he was aware of the obstacles and difficulties raised by the meeting’s participants and asked related government agencies to quickly address those issues. (Reuters)

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