Vietnam mulls relaxing foreign ownership limits

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Vietnam moved closer to relaxing restrictions on foreign investors as the Finance Ministry submitted a plan to Prime Minister Nguyen Tan Dung for raising the cap on overseas ownership at some companies.

The proposal would allow foreigners to increase holdings of voting shares in "non-conditional" industries to a maximum 60 percent from the current cap of 49 percent, Nguyen Son, the head of market development at the State Securities Commission, said in an e-mailed statement yesterday. For restricted industries, overseas investors would be able to buy an additional 10 percent of non-voting shares, on top of the 49 percent limit for voting stock, Son said, without providing details on which companies are restricted.

Vietnamese regulators see foreign investment as a key to growth in the nation's $45 billion stock market. The benchmark VN Index has climbed 24 percent this year, versus a 3.1 percent gain in the MSCI Asia Pacific Index, as international money managers bought $162 million of Vietnamese shares. The market has attracted net inflows every year since Bloomberg began compiling the annual exchange data in 2007.

"This is great news to the market and expected by some traders, as the recent improving sentiment showed," Attila Vajda, a Ho Chi Minh City-based analyst at ACB Securities Co., said by phone.

Merger plan

The market regulator also will submit a proposal in the fourth quarter to establish the Vietnam Stock Exchange through a merger of the Ho Chi Minh City bourse and the Hanoi Stock Exchange, Son said in the statement.

Even after this year's gains, the VN index is down 67 percent from its March 2007 peak. Gross domestic product expanded 5.25 percent last year, the slowest pace since at least 2005, according to the General Statistics Office.

Vietnamese shares have advanced this year as the central bank cut interest rates for the eighth time since the start of 2012 and the government approved the formation of an asset management company to buy bad loans from banks. The VN gauge is valued at 10.9 times estimated earnings for the next 12 months, versus 10 times for the MSCI Emerging Markets Index, according to data compiled by Bloomberg.

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