T. Rowe Price: Vietnam opening a 'huge positive'

Added 7th July 2015

International investors will be able to take a 100% stake in Vietnamese companies when the country scraps its foreign ownership limits in September, which T. Rowe Price’s Oliver Bell said will remove reluctance to invest in the market.

T. Rowe Price: Vietnam opening a 'huge positive'

Last week, the Vietnamese prime minister, Nguyen Tan Dung, confirmed that the 49% cap on overseas ownership would increase to 100% in a bid to boost the country’s economy through international trade.

This new limit will apply to most industries in Vietnam, however, certain sectors such as banking and state-owned companies are likely to be exempt.

Bell, fund manager of the T. Rowe Price Frontier Markets Equity Fund, said this change in Vietnamese economic policy is an example of strong structural improvements which are beginning to permeate frontier markets.

“Dung has been looking to amend the rules for some time, as he recognises foreign ownership limits are an impediment to deepening financial markets and can hold back economic growth,” he said.

“While this will only apply to some sectors, it is no doubt hugely positive for foreign access, index weights and associated fund flows.”

“Dung has been looking to amend the rules for some time, as he recognises that foreign ownership limits can hold back economic growth"

Bell said relaxing the limit will give Vietnam’s stock market a better chance of winning an upgrade from MSCI frontier market to emerging market status, a position which had previously been prevented by the illiquidity of the market and its failure to meet accessibility requirements.

“There is a cyclical recovery currently underway in Vietnam, with rising consumer confidence and real estate prices,” said Bell, adding that T. Rowe Price takes a bullish stance on Vietnam, with the country being the largest absolute and relative weighting in its Frontier Markets Equity Fund.

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