More foreign ownership for strategic investors allowed at Vietnamese banks

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A government decree to take effect February 20 will allow single strategic foreign investors to own up to 20 percent of domestic banks.

The rate is now capped at 15 percent.

The ownership cap for a foreign organization will increase to 15 percent from 10 percent.

But the total non-Vietnamese ownership will remain capped at 30 percent.

The government has pledged to consider increasing this as well as loosening other regulations for strategic foreign investors in certain special cases to facilitate structural reform of weak banks.

Analysts have suggested that the government should raise the ownership cap in not only banking but also other sectors, where the limit is currently set at 49 percent.

Can Van Luc, a senior advisor to the state-owned Bank for Investment and Development of Vietnam, said that the 30 percent limit is too low to attract investors to Vietnamese banks, most of which are small.

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He said the cap should be raised to 49 percent.

Reuters reported late last month that Prime Minister Nguyen Tan Dung was expected to approve within days an amendment increasing the foreign ownership limit and voting rights to 60 percent from the current 49 in certain listed firms.

This would be permitted in certain sectors and with the approval of shareholders and Dung himself.

Investors welcomed the idea as a positive step towards bringing more investment into Vietnam's two stock exchanges, but said the law needs to be loosened further.

The main stock exchange in Ho Chi Minh City has risen 21 percent last year, the best performer in Southeast Asia and the fourth in Asia.

It was still down 57 percent from its peak in March 2007 and only a minor player in the region with market capitalization of US$40 billion.

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