Foreign fund managers may get wings clipped

Foreign securities investments may face tougher time

The draft states that “foreign fund management companies which want to get involved in securities investment are required to establish branches in Vietnam or find local partners to set up fund management joint ventures”.
The draft would also require foreign fund management companies which want to establish branches in Vietnam to be legal entities with at least three years experience and currently managing assets worth at least $500 million.
Nguyen Hoang Hai, general secretary of the Vietnam Association of Financial Investors (VAFI), said that this regulation, should it take effect, would cause great difficulties to the fledgling local securities market which is just seven year old. VAFI has submitted a document to the Government Office, the Ministry of Finance and State Securities Commission outlining the possible difficulties.
“As many as 80 per cent of foreign fund management firms, which are currently involved in the local bourse would have to halt their operations and withdraw from market participation since they would be unable to satisfy the new requirements,” Hai said.
VAFI figures indicate that around 200 foreign institutional investors are currently involved in the local securities market; however, just fifty have set up liaison offices in Vietnam or were closely attached to foreign fund management companies.
The remaining 150 foreign institutional investors haven’t set up representative offices nor do they have any relationship with local securities companies or fund management companies.
VAFI’s report stated: “Such requirements won’t comply with international rules and will make the foreign investment environment worse, affecting dramatically the local bourse which is in a dire shortage of indirect foreign capital.”
However, UK-headquartered Dragon Capital director Dominic Scriven looked at the situation from a different angle, saying that the new requirements for foreign fund management companies would serve to make these firms more closely commit to the local securities market.
He said that total assets-under-management requirement of $500 million nationwide was not excessively high and that smaller institutional investors which could not satisfy the new requirement could coordinate with other foreign fund management firms that could.