More foreign investors continue to buy into Vietnam’s stock market, but legal restrictions are still limiting their potential, brokerages complain.
The number of individual foreign customers at major securities companies such as Saigon Securities Inc. (SSI), Bao Viet Securities Company (BVSC), Asia Commercial Bank Securities, and FPT Securities Inc. increased significantly last year.
Overseas investors bought nearly VND34 trillion (US$1.84 billion) worth of shares on the Ho Chi Minh Stock Exchange (HOSE) last year, up 34 percent from 2008, according to figures on the HOSE website.
As most of them are from Japan, China and South Korea, the brokerages have started to hire staff fluent in Japanese or Chinese to develop their foreign customer group.
Kim Eng Securities Vietnam Joint Stock Comapny, a unit of Singapore-based Kim Eng Holdings Ltd., recently opened an office in Ho Chi Minh City’s Chinatown (Cho Lon, District 5) to serve the Chinese community, while SSI, Vietnam’s largest brokerage, has established a special brokerage group for foreigners.
“The number of foreign investors opening accounts to trade directly on the Vietnam market will rise in the coming time,” said Tran Anh Dung, chief broker at BVSC branch in HCMC. “Thus there needs to be brokers who know foreign languages to work with them or to translate information concerning certain stocks and firms when needed.”
Investors from other Southeast Asian countries such as Singapore, Malaysia and Thailand are also eyeing the Vietnamese stock market.
Roadblocks
Dominic Scriven, General Director of HCMC-based fund manager Dragon Capital, said many foreign investors were active on the Vietnamese stock market but he added that the long procedures necessary to get a trading code and open an account had discouraged many others.
The Vietnam Securities Depository grants the code after it approves the legal record and visa of the investors, which they have to have certified at authorized agencies and the Vietnamese consulate in their home countries.
If the foreigners live in Vietnam, the papers can be certified at their home country’s consulate and then at the local Department of Foreign Affairs.
But the biggest problem for foreign investors, according to insiders, is that they are only allowed to buy a certain number of shares.
The government raised the maximum stake allowed to be owned by foreign investors to 49 percent in local non-bank companies last June, up from the previous 30 percent cap.
Pham Linh, General Director of Vietnam International Securities Joint Stock Company, said government agencies should gradually raise the cap to encourage more investors to invest in Vietnam.
The Director of another foreign fund manager based in HCMC said foreign investors were still hesitant to enter Vietnam because some listed firms here lacked finance, investment and risk management skills.
Many equitized firms were neither flexible nor innovative, said the Director who asked not to be named.