When will Vietnam achieve Emerging Market status? - Fact sheets April

The Vietnamese capital markets have undergone an unprecedented transformation due to the rapid growth in the number of private investors. Within one year, 2.5 million new trading accounts were opened, pushing the total market value above 300 billion dollars due to new inflow. With a daily liquidity of nearly 1 billion dollars and 80% activity from domestic investors, Vietnam seems ready to transition to the larger Emerging Markets Index (EM index).

If Vietnam were to be included in the EM index, the country could attract significantly more foreign capital and potentially see a revaluation of various listed companies. To qualify for inclusion in the MSCI EM index, 18 criteria must be met, related to a country's economic development, market capitalization and tradability of shares, and market access. This requires a sufficiently developed infrastructure for trade and settlement of transactions.

The two biggest obstacles Vietnam still has to tackle are the Foreign Ownership Limits (FOL) and the mandatory pre-financing for transactions. Pre-financing means that you first need to deposit the local currency (Vietnamese Dong) in your account to carry out a purchase transaction. The FOLs are restrictions on the percentage of the total number of outstanding shares of a company that can be owned by foreign investors. For Vietnamese shares, the FOL varies depending on the sector and the company, but is usually between 30% and 49%.

At the moment, the most popular stocks are "closed" to foreigners because the FOL limit has been reached. Approximately 15% of the TCM Vietnam fund is invested in these FOL shares. Foreign investors regularly offer premiums above the current price to take over these shares. If the FOL for Vietnamese shares were to disappear, this would likely be beneficial for the share prices, as the lifting of the restrictions on foreign ownership could lead to greater demand for Vietnamese shares from foreign investors.

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More news about Vietnam, Africa and the Global Frontier fund can be found in the latest fact sheets of the equity funds:

TCM Global Frontier High Dividend Equity

TCM Vietnam High Dividend Equity

TCM Africa High Dividend Equity