Although the stock market is thriving when the VN Index has continuously kept breaking the limit to further gains, according to the experts, the gains are not sustainable and investors will continue to wait for the policy to extend the limit of the percentage ownership for the foreign investors (loosening the room) on the stock market.
The loosening of the room for foreign investors is a milestone on the stock market, which stimulates foreign investors to invest more in the domestic stock market. However, this has not been approved by policy makers.
There are too many problems to be solved
According to the operators of the stock market, loosening the room for foreign investors only is made when the investment categories and the business conditions are clearly defined. Although the plan to review the categories has been launched, it has been approved, even regardless the periods after that the National Assembly will pass to make adjustments of the relevant laws. Many investors said that with such progress, it is not probable that the adjustment will be launched soon though the VNIndex continues to reach to new milestones during the past 4 years.
Experts said that the loosening of the room in the stock market for the foreign investors will make positive changes to the stock market but it is not easy as this is related to the existing laws and the complex management system. For example, the reviewing timeline will take time because of the large number of the business lines that are specified in Article 391; there are 386 conditional business categories under the management of the 16 ministries and agencies. This reflects the big numbers.
However, from another aspect, experts also said that managers should focus on solving problems related to the loosening of the room for the foreign investors. If this is delayed too long, it will be less attractive to foreign investors to the stock market because since 2013, there was a promise to loosen room for foreign investors from the 49 percent to 60 percent.
In fact, raising the ownership limit for the foreign investors to 60 percent is just a criteria to stimulate the inflow of foreign investment into the listed companies, along with other criteria such as the business potentials, human resource and administration system. However, it is obvious that the approval of increasing ownership percentage of the larger firms could speed up the decision making, which is considered one of the most wanted factors that motivates the foreign investors.
According to Yun Hang Jin, Director of the Emerging Markets Division of the Securities Investment from the South Korea, the delay of the loosening of the room for foreigners is the cause to restrict the capital flows into the financial markets as well as the foreign direct investment.
On the stock market, there are many blue chips that no longer have room for all foreign investors though they still have demands. This would be a challenge for the foreign companies in raising capital and taking controls over the unlisted firms.
"The delay loosens the room for the foreign investors, which cause negative impacts on the stock market and the economy of Vietnam," Mr Yun said.
Big concerns
Due to the concerns caused by the acquisitions of the foreigners, Vietnam is still cautious about opening the door to foreign investors, which have a great impact on mobilizing external resources to promote investments and the development of the economy. Typically, the Government issued Decree 01/2014 from early 2014 to allow a foreign investor to hold an additional 5 percent of the total shares of the Vietnamese bank. It means that the maximum shares are increased to 20 percent. But after the decree was issued, there were quite a lot of the domestic banks where the percentage of the ownership of the foreign investors are hitting this threshold.
And after nearly a year of the promulgation of the Decree, its impacts are still very limited as foreign investors still do not have a clear move to any investment in the Vietnamese banks, especially the low capacity banks, to promote the restructuring of the banking system.
Foreign investors have the same concerns in the regional countries; the loosing the room in such the countries is still adjusted carefully. Typically, the Philippines only allows the 40 percent of the ownership the foreign investors; and China, a country with a much more developed financial system than Vietnam, also limits the foreign investors at the ownership of 30 percent.
Therefore, what are the most attractive areas the foreign investors will be interested in if the room is loosened? According to Mr Yun Hang Jin, foreign investors are still very interested in the either textile sector due to their higher expectations about the possibility of the signing of the TPP agreement or the IT industry and the transport sector due to the increasing inflow of the capital for these groups and a move of relocating the factories from other countries to Vietnam.
Regarding the thriving of the VN Index in the recent time, Yun Hang Jin said that the recovery of the stock market is mainly due to the expectations about the possibility of the further monetary easing, the information related to the discovery of a new off-shore oil field of Vietnam, the boosted lending margin of the securities companies and the booming stock speculation.
Luong Tuan
Vietnamese
