Foreign Ownership in Vietnam: Breakthrough Opportunity as Market Upgrade Nears

The overall picture of foreign ownership

Foreign Ownership Limit (FOL) has always been a “hot” topic when it comes to the potential reclassification of Vietnam’s stock market from Frontier to Emerging. According to Bloomberg and HSBC statistics, among Vietnam’s 25 largest listed companies, many are approaching the FOL ceiling, particularly in the banking and retail sectors.

Examples:

• ACB, TCB, MBB, HDB, VIB: commercial banks with foreign ownership ratios close to the 30% ceiling.

• MWG: nearly maxed out, with foreign ownership at 48% versus the 49% maximum.

• VNM, MSN: having opened 100% foreign ownership room, still have significant capacity (VNM with 51% remaining, MSN with 75%).

This shows that foreign capital has a strong presence, yet legal bottlenecks and technical restrictions continue to hold back further breakthroughs.

The significance of market reclassification

Once Vietnam is upgraded to Emerging Market status (MSCI or FTSE), it will mean:

• Global ETFs required to allocate capital: It is estimated that passive funds could channel USD 5–7 billion in the initial phase, mainly into blue-chip stocks included in the MSCI Emerging Markets Index.

• Active funds: inflows could multiply several times, as active managers value Vietnam’s solid macroeconomic fundamentals, 6–7% GDP growth, and political stability.

• Liquidity boost and P/E re-rating: Studies of markets that were upgraded (Pakistan, Qatar, UAE) show average valuations rose 20–30% within 12–18 months post-upgrade. Vietnam can fully expect a new growth cycle.

Potential capital inflows into Vietnam’s market

Currently, Vietnam’s stock market capitalization stands at around USD 200 billion. If the market is upgraded, ETFs such as the iShares MSCI EM ETF and Vanguard FTSE EM ETF are expected to allocate capital to Vietnam at a weighting of approximately 0.7–1% of their global portfolios.

This translates into USD 5–7 billion in passive inflows. When combined with active capital, the figure could reach USD 10–15 billion in the first few years.

Compared with the current average daily trading liquidity (around USD 1 billion per session), this level of inflows could potentially double market liquidity, generating a strong spillover effect.

Top sectors and companies set to benefit

(1) Banking – the primary magnet for foreign capital

• Key players: VCB, BID, CTG, TCB, VPB, MBB, ACB, HDB, VIB – all with large market caps and high liquidity.

• Challenge: Many banks have reached their FOL ceiling, requiring expansion. Notably, VIB, TCB, and HDB have voluntarily capped foreign ownership, which under new draft regulations may no longer be allowed.

• Advantage: Banking profits account for over 30% of total market earnings.

• Risk: potential NPLs from real estate exposure; regulatory restrictions on foreign ownership ratios.

(2) Consumer & Retail – a sustainable growth driver

• Key players: MWG, VNM, MSN, SAB – consistently favored by foreign investors.

• MWG is nearly maxed out, while VNM and MSN still have large room for foreign capital.

• Advantage: Vietnam’s rapidly expanding middle class and booming consumption.

• Risk: fierce competition, margin pressures.

(3) Real Estate & Construction

• Key players: VHM, VIC, VRE, NVL – with large land banks, poised to attract inflows amid urbanization.

• Advantage: long-term growth potential in Vietnam’s property market.

• Risk: high leverage, dependence on regulatory approval for land clearance.

(4) Energy & Infrastructure

• Key players: GAS, POW, BSR, PLX – defensive plays, benefiting from long-term energy demand.

• Advantage: Vietnam as a regional industrial hub, driving electricity and gas demand.

• Risk: global oil & gas price volatility.

Vietnam stands at a golden opportunity to leap forward with a potential market upgrade. With prospective inflows of tens of billions of USD, heightened global fund interest, and momentum from regulatory reforms, the reclassification story is not just an “opportunity” but a turning point for Vietnam’s capital market.

In this landscape, banking, consumer & retail, real estate, and energy will be the key pillars benefiting the most. However, to fully unlock this potential, Vietnam must swiftly address FOL constraints and enhance transparency standards, paving the way for a surge in foreign capital.