Draft decree to facilitate foreign investors’ access to Vietnam’s stock market

Article 139.1.e of Decree 155 stipulates: “In case a public company decides to set a foreign ownership ratio lower than the ratio specified at Point a, b, c, or dd, Clause 1 of this Article, such specific ratio must be approved by the General Meeting of Shareholders and specified in the Charter of the Company.”

The draft decree now abolishes such provision, disallowing public companies to set a foreign holding cap lower than the law-specified ratio, unless otherwise decided by competent state agencies.

According to the MOF, such proposal aims to ensure the interest of foreign shareholders and, at the same time, mitigate risks for foreign investors when they are unable to foresee changes in enterprises, thus increasing the attractiveness of Vietnam’s stock market in the eyes of foreign investors.

Although there are some opinions that the proposal might facilitate unwanted takeovers, the proposal is warmly welcomed by securities experts.

Latest data from the Vietnam Securities Depository show that out of nearly 1,900 enterprises listed and registered for trading on the Stock Exchanges, more than 500 set the foreign holding cap of zero percent. Except companies that operate in the sectors and fields subject to foreign ownership limits, most companies do so at the proposal of the Board of Directors’ proposal after getting the nod from the majority of shareholders.

Nguyen The Minh, Director of Analysis at Yuanta Vietnam Securities Company, said the placement of foreign ownership limits at public companies is one of the bottlenecks that hinder foreign investors’ entry to the market, adding there is no need to worry about unwanted takeovers as companies have a lot of anti-takeover tools.

Also provided by the draft, public companies would be required to clearly disclose information on the maximum foreign holding limit on their websites and to the Stock Exchanges within six months after the draft decree comes into force.

By: VLLF