Investors not satisfied with higher foreign ownership at Vietnam banks

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Investors say the Vietnamese government's recent move to increase single strategic investors' ownership at domestic banks will not be enough to create positive change on the stock market.

The maximum rate will increase to 20 percent from the current 15 percent starting February 20.

But the total foreign ownership in a bank will still be limited to 30 percent. 

News website Saigon Times quoted Tay Han Chong, general director of the Mekong Development Bank, as saying it will be still difficult for a strategic investor to control a bank when he owns a maximum 20 percent stake.

Tay also doubted that a bank would entrust its operational management to a strategic investor holding only a fifth of its shares.  

He said an ideal cap would be over 50 percent.

Nguyen Xuan Binh, deputy chief of Bao Viet Securities Co's financial analysis unit, expected the news not to greatly affect mergers and acquisitions in the banking sector.

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An investor typically needs to own at least a 30 percent stake to have influence in a bank, he said, adding that other regional countries cap the ownership at 30 percent and above.

Given the small increase in strategic investors' ownership, Binh said there would not be an immediate impact but rather more fundamental long-term support for the stock market.

According to Binh, investors had expected more from the government's decision because rumors had circulated since late last year that the government was considering increasing the foreign ownership in not only banking but also other businesses, where the maximum rate is currently set at 49 percent.  

Analysts had said increased foreign ownership in local businesses would spur portfolio investments in the country's two stock exchanges.

The larger exchange in Ho Chi Minh City gained 21 percent last year as the best performer in Southeast Asia.

But it is still a minor player in the region with a market capitalization of US$40 billion, an eighth the size of Thailand and a tenth of Singapore.

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