Vietnam’s stock market has become an attractive destination for foreign investors seeking opportunities in Southeast Asia’s rapidly growing economies. This comprehensive guide explores the key regulations, requirements, and procedures that foreign investors need to understand before entering the Vietnamese stock market.
Overview of Vietnam’s Stock Market
The Vietnamese stock market operates through two main exchanges: the Ho Chi Minh Stock Exchange (HOSE) and the Hanoi Stock Exchange (HNX). These platforms serve as the primary venues for equity trading, with HOSE handling larger-cap stocks and HNX focusing on smaller and medium-sized enterprises.
Market Structure and Regulatory Bodies
The State Securities Commission of Vietnam (SSC) serves as the primary regulatory authority, operating under the Ministry of Finance. The Vietnam Securities Depository (VSD) handles settlement and clearing operations, ensuring smooth transaction processing and record-keeping.
Together, the SSC and VSD ensure a transparent, efficient, and secure market environment, with the SSC overseeing regulatory compliance and the VSD facilitating seamless transactions and ownership tracking. These bodies work in tandem to maintain market integrity and foster investor confidence.
Foreign Investment Regulations
Investment Limits and Restrictions
Foreign ownership limits (FOL) vary by sector and company type:
- 50% cap for companies in restricted sectors (Article 139.1.c Decree 155/2020/NĐ-CP): If foreign ownership ratio limits are not specified in the negative list of market access, the maximum foreign ownership ratio in the company shall be 50% of charter capital.
If the business lines of the public company are on the negative list of market access, regulations on the foreign ownership ratio of each category shall apply (List of Restricted Sectors and Industries for Foreign Investors’ Market Access – Decree 31/2021/NĐ-CP).
For example, a foreign investor who does not meet the requirements in the Law on Securities may only hold up to 49% of the charter capital of a securities company or fund management company. (Article 77 Law on Securities)
- 100% ownership permitted in most non-restricted sectors (Article 139.1.d Decree 155/2020/NĐ-CP): If the public company does not fall into any of the cases specified in the Law, there is no maximum limit for the foreign ownership ratio.
- Specific limits apply to banking (30%) and other strategic industries (Article 7.5 Decree 01/2014/NĐ-CP): The total shareholding level of foreign investors shall not exceed 30% of the charter capital of a Vietnamese commercial bank.
Other criteria of foreign ownership ratio in the securities market of Vietnam are also regulated by the law, such as (Article 139 Decree 155/2020/NĐ-CP):
- If the business lines of the public company are regulated by a treaty to which Vietnam is a signatory, the treaty shall apply.
- If the business lines of the public company are regulated by regulations of law that specify foreign ownership ratio, these regulations shall apply.
- In case the public company has multiple business lines that are subject to different foreign ownership ratio limits, the foreign ownership ratio must not exceed the lowest limit among them.
Account Opening Requirements
Investors can open a securities trading account both online and offline, depending on the choice and requirements of each securities company.
Foreign investors must complete several essential steps to participate in the market:
Open a securities trading account with a licensed securities company (Article 6 Circular 120/2020/TT-BTC)
The investor must open a securities trading account at a securities company to carry out securities transactions as prescribed in this Circular and is also responsible for providing sufficient and accurate information for customer identity information during the course of opening a trading account and complying with Article 6.1 Circular 120/2020/TT-BTC.
An investor can open multiple securities trading accounts based on the principle that they are allowed to open only one trading account at each securities company, except in cases regulated by law.
Establish a capital contribution account with an authorized bank
- Foreigners invest directly in Vietnam – Direct Investment Capital Account (DICA) (Article 5 Circular 06/2019/TT-NHNN):
An investor specified in Article 5.1 Circular 06-2019-TT-NHNN shall open a foreign currency account at one (01) authorized bank in order to receive and make payments in that currency during the process of foreign direct investment in Vietnam
If investing in Vietnamese Dong, one (1) direct investment capital account in Vietnamese Dong may be opened at the authorized bank where the direct investment capital account in foreign currency was established, to conduct lawful transactions of receipts and payments in Vietnamese Dong related to foreign direct investment activities in Vietnam.
(Here, the sentence is already in an active voice. If you invest in Vietnamese Dong, you may open one (1) direct investment capital account in Vietnamese Dong at the authorized bank where you established the direct investment capital account in foreign currency. This account will allow you to conduct lawful transactions of receipts and payments in Vietnamese Dong related to foreign direct investment activities in Vietnam.
- Foreigners invest indirectly in Vietnam – Indirect Investment Capital Account (IICA) (Article 4.1 Circular 05/2014/TT-NHNN)
Foreign investors must conduct all indirect investment activities in Vietnam in Vietnamese Dong. They must carry out transactions related to foreign indirect investment activities in Vietnam through one (1) indirect investment capital account opened at one (1) authorized bank.
Register for a securities trading code with the VSD
Foreign investors and foreign-invested economic organizations applying this circular, who are foreign investors in accordance with the investment law and relevant laws, must register securities trading codes before opening securities trading accounts. (Article 6.2 Circular 203/2015/TT-BTC)
The foreign investor can open a securities trading account and make an investment immediately after receiving the securities trading code in the form of an electronic confirmation. (Article 138.3 Decree 155/2020/ND-CP)
The VSD regulates the procedures for registering a securities trading code (STC), issuing the STC registration certificate, updating information, and cancelling the STC in Decision 20/QĐ-HĐTV/2023, which is related to foreign direct investment activities in Vietnam.
Trading Rules and Procedures
Trading Hours and Settlement
The Vietnamese stock market operates Monday through Friday, excluding public holidays, with trading sessions from 9:00 AM to 3:00 PM local time. (Article 13.1 Decision 17/QĐ-HĐTV/2022 of the VSD)
Each stock exchange has different trading hours. Therefore, it is important to thoroughly understand the exchange where you are investing to be aware of its rules and trading times. This way, we can optimize our investment strategy and manage risks more effectively.
The settlement follows a T+2 cycle for stocks and T+1 for bonds. (Article 2.2 Decision 48/QĐ-HĐTV/2024 of the VSD)
To know more about the regulation of the VSD, refer to the official portal of the VSD: The Vietnam Securities Depository and Clearing Corporation.
Price Limits and Trading Mechanisms
Daily price movement limits are set at ±7% for stocks listed on HOSE and ±10% for those on HNX. These limits help maintain market stability and prevent excessive volatility.
These limits act as a safeguard, ensuring that stocks do not experience extreme price fluctuations within a single trading day, which could lead to panic buying or selling. By capping price movements, the limits provide investors with a more predictable and controlled environment, allowing them to make informed decisions based on market fundamentals rather than short-term volatility. This promotes a balanced and fair market, reduces the risk of market manipulation, and fosters long-term investment strategies.
Documentation and Compliance Requirements
Required Documentation
Foreign investors need to register for a Securities Trading Code (STC) with the Vietnam Securities Depository and Clearing Corporation (VSDC). The documents required for STC registration may include:
- STC registration form (Form 41 of VSDC);
- Authorization letter signed to permit a member of the Vietnam Securities Depository to register the STC on behalf of the investor;
- Two notarized copies of the investor’s passport.
Foreign investors must open a securities trading account at a securities company based in Vietnam. The documents required to open a securities trading account may include:
- Account opening registration form (The account opening registration form will vary depending on each securities company);
- Notarized copy of the STC certificate;
- Notarized copy of the passport;
- Notarized copy of IICA account confirmation or IICA account opening contract;
- Proof of financial capacity;
- Investment registration certificates (for institutional investors);
- Tax registration documents;
- Other documents as required by each securities company.
Compliance Obligations
Ongoing compliance requirements include:
- Regular reporting of significant shareholding changes: Foreign investors must regularly report any significant changes in shareholding, particularly when their stake crosses 5% in a listed company. This includes disclosing substantial ownership positions to the relevant authorities. (Article 141 Decree 155/2020/ND-CP)
- Disclosure of substantial ownership positions (>5%): This ensures market transparency and fairness by informing stakeholders of significant changes in control or influence, particularly when an investor holds 5% or more of a company’s shares. This helps prevent market manipulation, supports fair trading, and fosters investor confidence and stability by making key ownership information available to the public. (Article 127 Law on Securities)
- Adherence to insider trading regulations: Use of internal information to buy or sell securities to oneself or another person; revelation or provision of internal information; advising another person to buy or sell securities based on internal information are forbidden. (Article 12.2 Law on on Securities)
- Foreign Ownership Limits: Investors must adhere to the foreign ownership limits (FOL) established for different sectors and companies. For example, there are caps on foreign ownership for certain strategic industries like banking, which must be strictly followed. (Article 139 Decree 155/2020/NĐ-CP and other related regulations)
- Tax Compliance: Foreign investors need to comply with Vietnamese tax laws, including reporting income from investments and paying applicable taxes on dividends, capital gains, etc.
- Account Maintenance: Securities accounts must remain active, and investors are required to ensure that their accounts are properly maintained by submitting updated personal and financial information as required by the securities companies.
Future Outlook and Opportunities
Vietnam’s stock market continues to mature, with ongoing reforms aimed at:
- Improving market accessibility for foreign investors: Vietnam is simplifying processes to attract more international capital, diversify investment sources, and increase market liquidity by making it easier for foreign investors to participate.
- Upgrading market infrastructure and trading systems: The country is modernizing its trading platforms and systems to enhance efficiency, reduce transaction costs, and ensure smoother, secure trading experiences.
- Enhancing transparency and corporate governance standards: Efforts to improve transparency in financial reporting and corporate governance aim to build investor trust, attract long-term investment, and reduce market volatility.
Conclusion
While Vietnam’s stock market presents attractive opportunities for foreign investors, success requires a thorough understanding of the regulatory framework and compliance requirements. As the market continues to evolve, staying informed about regulatory changes and maintaining proper documentation will be crucial for successful investment operations.
Frequently Asked Questions
- What is the minimum investment amount required for foreign investors?
There is no statutory minimum investment amount, but individual securities companies may set their requirements. - Can foreign investors trade all listed securities?
Foreign investors can trade most listed securities, subject to foreign ownership limits and sector-specific restrictions. - How long does it take to open a trading account?
The process typically takes 2-3 weeks, depending on documentation completeness and regulatory approval times. The time to open an online securities trading account will be faster than opening one in person.
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