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A quick look at the VN30 index, which comprises 30 large-cap and liquid stocks and is affiliated with the S&P Dow Jones, confirms that foreign investors have enough investable stocks to choose from.

Vietnam’s Stock Market is a Good Investment Story for Foreign Investors, HSBC Says
There is a common perception that Vietnam is a good investment story that is not investable – the market is too small, there are too few stocks, and it’s illiquid. This was the case for many years and, for a few very large funds, it might well still be the case. 
But for many others, this perception is plain wrong.
From two large-cap stocks with a market cap of more than USD5bn in 2015 in the Vietnam market as a whole, there are now 11. Average daily trading value in 2020 was USD430m, a record high, and more recently that has come close to hitting USD1bn. To put that into regional context, the Philippines has 13 stocks with a market cap above USD5bn and trades USD228m a day, Thailand trades USD3bn, and Indonesia USD1.5bn (all based on the 20-day average).
In short, Vietnam is now an investable market.
A quick look at the VN30 index, which comprises 30 large-cap and liquid stocks and is affiliated with the S&P Dow Jones, confirms that foreign investors have enough investable stocks to choose from.
Of the 30 stocks in the VN30 index, only six have reached their foreign ownership limits, nine have market caps above USD5bn and 15 between USD1bn and UD5bn, and 10 trade more than USD10m a day. On top of this, Vietnam’s equity market has outperformed all the major regional indices since 2015. But, despite this, flows into Vietnam have been muted, especially if you take out sales of stakes of some large companies in 2017-18 as part of the SOE reform process.
Foreign investors have a history of caution regarding Vietnam. In the aftermath of the economic boom and bust cycle of 2007-09, the local index was range bound, stuck between 400 and 600 until 2015. But then a series of reforms was put in place by the government in 2011-13 to address structural issues with SOEs and the banking sector, starting to show results from 2015.
Economic growth started to pick up.
But memories of overheating in 2008-09 had not faded, and investors were sceptical. Man were quick to dismiss this growth as unsustainable. But this has not proved to be the case (see Asia Frontier Insights Vietnam: Too early to worry about overheating, 22 February 2016).
Foreign ownership limits – not such a big deal
One argument we often hear is that it is difficult to buy stocks in Vietnam because of foreign ownership limits (FOLs). This is also not the case. If foreign investors had bought market leaders which are not at their FOL, history shows that they would have still done well.
HSBC thinks buying market leaders – the largest listed stock in that sector – can provide investors with sufficient exposure to the Vietnam growth story and generate returns in the process. On the basis of equal weight, market leaders have risen 237% since 2015, outperforming the index by 136%. Liquidity remains an issue with smaller firms, while large companies also have better corporate governance and disclosure requirements.
HSBC argue that some of the stocks which are at their foreign ownership limit and therefore attract a premium have a strong earnings growth track record and still trade at cheaper valuations than their peers in Asia. So, adjusted for valuations, the foreign premium doesn’t look excessive.

DIEP NGUYEN