Foreign investment guide disappointing

The narrowing of the benchmark VN-Index on the HCM Stock Exchange which went from a loss of 1.73 per cent on Wednesday morning to just 0.41 per cent by the end of the session is attributed to the appearance of the circular. — Photo bizlive

HA NOI (Biz Hub) — The Ministry of Finance issued a circular to guide foreign investors in the equities market earlier this week to encourage more investment, but both analysts and investors were disappointed with its content.

Circular 123/2015/TT-BTC, which will go into effect on October 1, was designed to simplify procedures and documents for foreign investors. It also provides procedures and guidance for public companies that want to raise their foreign-owned ratio as allowed under Decree 60/2015/ND-CP effective on September 1.

The circular did help cushion the market, which, on Wednesday, was hit hard by the central bank's third depreciation of the dong this year.

Steep fall spiral

However, the market continued its steep fall spiral after the full content of the circular was published on the ministry's website on Thursday.

The VN-Index dived 1.9 per cent on Thursday and another 1.83 per cent yesterday.

According to many stock analysts, investors are disappointed with the circular since it does not specify lists of the conditional businesses for foreign investment and the foreign stakes permitted in these businesses.

The circular says public companies have the responsibility to determine their business lines and foreign ownership ratios. For conditional businesses, the foreign ratio must comply with international agreements and domestic law.

Analysts at Maybank Kim Eng Securities said many investors had expected the circular to provide details of foreign holding ratios in each business sector, but its main content was about procedures and documents for the participation of foreign investors in the stock market and procedures and documents for public companies to raise their foreign ownership ratios as allowed in Decree 60.

"A lost of investors showed disappointment since explicit details of foreign stakes in businesses are still unclear, especially in the context that the dong lost its value by another 1 per cent," analysts wrote in a report.

The new regulation did nothing to help companies raise their foreign stakes. They must wait for the list of conditional businesses which is within the jurisdiction of the Ministry of Planning and Investment, Do Ngoc Bao, analyst of MB Securities Co told the national news channel VTV1.

According to the 2014 Investment Law, 267 businesses sectors have restrictions on the level of foreign investment, ranging from 49 per cent to none at all.

Nguyen Thanh Long, vice chairman of the State Securities Commission, said the new circular would simplify the procedures and documents for the participation of foreign investors in the Vietnamese securities market as it reduced the volume of documents required and abolished requirements for consular notarisation and document translation. — VNS