VietNamNet Bridge - The lifting of the ceiling foreign ownership ratio in Vietnamese companies, if made, would help the VN Index climb to 650 points by the end of the year, economists have predicted.

The Ministry of Finance (MOF) lifted the spirits of foreign investors recently after saying that the issue would be settled within several months.

Thoi Bao Kinh Te Sai Gon has quoted its sources as saying that the State may allow foreign investors to hold up to 100 percent of stakes of enterprises in non-conditional business fields. Limitations will still be set in some specific business fields, such as banking and telecommunication.

Foreigners now are allowed to hold no more than 49 percent of stakes of listed companies. 

The ceiling was proposed to be lifted to 60 percent some months ago by several financial institutions. However, analysts said it seems that foreign investors will be given more than they expect.

They said that the lifting of the ceiling foreign ownership ratio, if approved, would have positive impact on the stock market.

BIDV Securities (BSC), in its latest report, said that if this happens, the stock market would see the VN Index increase in the second quarter, and slightly decrease in the third quarter before bouncing back in the fourth quarter. 

BSC predicted that the VN Index may reach 650 points by the end of the year.

Dau Tu newspaper has cited a report of MBS Securities as commenting that the higher ownership ratio to be offered to foreign investors is an urgent need to help develop the stock market and reshuffle the economy, because the new policy would help attract big capital flows to Vietnam.

It reported that many foreign investment funds complained they cannot buy good shares because there is no room left for foreign investors in profitable companies.

Quach Ngoc Tuan, deputy director of the Legal Department under the Ministry of Planning and Investment, while agreeing that it is necessary to lift the foreign ownership ratios in Vietnamese enterprises, pointed out that ensuring freedom for doing business is the spirit of all laws.

Tuan said the Investment Law prohibits six business fields only and sets conditions for 267 business sectors because of national security and social problems.  The law does not stipulate that Vietnam restrict foreign investments in large enterprises.

An economist said that offering more investment room for foreign investors is a move Vietnam should take if it wants to attract the world’s capital, which is believed to be heading toward developed economies.

A report from a foreign investment fund said that foreign portfolio investment in Vietnam this year had dropped by 50 percent, compared with the first quarter of 2014.

Thanh Lich