Foreign capital in wait for fresh policy move

Investors expect the new IT platform for the Vietnamese stock market to come online soon

Japanese-backed Capital Asset Management Limited (CAM) is holding an investment portfolio of firms listed on the Vietnamese stock exchanges with investment value touching $300 million.

Toshifumi Sugimoto, the company president, said that he is waiting for the deployment of new products, services, as well as a more favourable mechanism that upholds market development to increase their investment.

Each day, CAM and other foreign institutional investors keep tabs on Vietnam’s new policy moves, particularly regarding the new legal corridor for the Vietnamese stock market that is expected to significantly smoothen investor transactions, including those of foreign investors.

The set of new policies such as allowing intraday stock trading (T+0), short selling, or the roadmap for the deployment of non-voting depository receipts (NVDR) aim to clear pathways for faster and more reliable transactions in favour of both buyers and sellers.

Compared to other countries, one big reason foreign investors are still hesitant to spend on Vietnamese stocks is the current T+3 transaction scheme.

With T+3 (meaning transactions are only allowed after three business days since the date of trade) the investors find they are prone to many risks due to quick market movements and unpredictable developments in both the domestic and international markets.

The investors also expect the new IT platform for the Vietnamese stock market to come online soon, helping to boost trading as the Ministry of Finance is gathering comments for a new draft circular guiding transactions in the Vietnamese stock market that will supersede Circular No.203/2015/TT-BTC.

Foreign investors are also interested in new products and policies being developed by the State Securities Commission (SSC) like NVRD, lowering payer security when buying stocks and shares, or lending shares for short selling, among others.

On its side, CAM has translated the local policy proposals into Japanese for the use of investors in their home country and also worked on a capital attraction plan to scale up capital disbursement in the Vietnamese stock market when opportunities arrive.

According to Thomas Hugger, CEO of international management fund AFC Asia Frontier Fund, the Vietnamese government should create more opportunities for foreign investors to deepen their engagement in the Vietnamese stock market such as through trimming intermediary expenses.

He also proposed setting up a separate trading floor for tickers not facing foreign investor shareholding restrictions.

From the perspective of a domestic asset management firm, Nguyen Phan Dung, vice president of SSI Asset Management Limited (SSIAM) advocates that Vietnam has always been an inviting destination for investors.

Vietnam’s active engagement with the world community through a raft of multilateral trade agreements and the strong rise of the private sector with growing contributions to the GDP are vivid examples attesting to the country’s improved investment climate.

To attract foreign capital influx, he said a rewarding juridical environment needs to be in place, along with transparent and consistent state policies and regulations.

“Vietnam will coax more foreign capital flows once it has a more comprehensive policy system,” Dung said.