Why Vietnam’s Stock Market Continues to Soar

Vietnam’s stock market is so small ($45 billion) that international publications like the Wall Street Journal don’t bother listing it.  Meanwhile, the Vietnam index is Asia’s shining star for 2013 — up 26% so far this year, 10 percentage points more than any other Southeast Asian benchmark.

The rising Vietnam market is likely to continue, for reasons outlined over the past four years in the blog and one new reason:  The Vietnamese are planning to let foreigners buy a larger share of their companies.

Foreign ownership of publicly traded companies is now limited to 49%, and the finance ministry is taking up a proposal this summer to increase the limit and help the foreign-investment-led rally continue.  And there’s a lot of room to grow;  the VN Index closed Thursday (June 6) at 520.9, still well below half of its all-time high of 1174 five years ago.

It remains to be seen what changes Vietnam’s government will make in foreign ownership limits, if any, but a positive impact on the public equity markets is likely.

Bloomberg reports international investors have bought $244 million of Vietnamese stocks so far this year, the most since 2008. The VN Index is now up 48% since the start of 2012 as Vietnam’s economic climate has brightened — although the country’s economic challenges are still causing many companies to post losses.

In addition to raising foreign ownership limits, Vietnam’s regulators are planning to merge the Hanoi and Ho Chi Minh City exchanges this year as well as add covered warrants, derivatives, and other products likely to spur investment.

Overall, Vietnam appears to be a good bet for foreign investors with the vision to explore one of the world’s most dynamic frontier markets when much of the international business media barely notices it exists.


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