Vietnam lacks legal framework as FDI firms eye stock market listings

Of the 10 FDI enterprises listed on Vietnam’s stock market, six are on the Ho Chi Minh City Stock Exchange (HoSE), one on the Hanoi Stock Exchange (HNX), and three on the Unlisted Public Company Market (UPCoM).

As the market increasingly demands high-quality stocks, FDI enterprises, with their strong financial capacity, effective governance, and reputable brands, are seen as a promising supply source.

Previously, 11 FDI companies were listed in Vietnam, but some have since delisted due to underperformance. Notably, Full Power fully withdrew from the market.

From 2003 to 2008, 10 companies converted from limited liability to joint-stock status to list. However, since Siam Brothers Vietnam joined HoSE in 2017, no new FDI companies have been listed.

Ha Vo Bich Van, a financial advisor at FIDT Investment Consulting and Asset Management JSC, noted that Vietnam currently lacks a specific legal framework to allow FDI enterprises to list on local exchanges.

Previous legal documents have expired, and the 2020 Investment Law and 2019 Securities Law have no clear successor provisions.

This legal gap has left many FDI companies—despite their interest in raising capital and building a brand in Vietnam—without a pathway to list.

A director of a major securities firm in Vietnam shared that the appetite for listing among FDI firms is not small, but regulatory clarity and support are essential to drive progress.

A representative of C.P. Vietnam stated that Vietnam has not yet initiated procedures to approve FDI enterprise listings on the local exchanges. The company is awaiting the government’s review of related processes and regulations.

“Our group is ready. If clear regulations and procedures are established, we are prepared to proceed,” the C.P. Vietnam representative said.

Paving way for FDI listings

Thomas Nguyen, chief global markets officer at SSI Securities, emphasized that encouraging FDI enterprises to list on Vietnam’s stock exchanges is vital for capital market development.

He noted that regulatory bodies are increasingly focusing on listing approvals, reflecting the government's clear orientation toward attracting both domestic and foreign firms to the stock market.

Vietnam is home to many high-quality FDI companies. These firms represent a valuable source of supply for the stock market, capable of diversifying offerings and enhancing investor appeal.

However, for these enterprises to choose Vietnam as a listing destination, two key conditions must be met.

First, the domestic market must offer valuations that are competitive with other potential markets. Second, the listing procedures need to be simplified and streamlined.

Thomas Nguyen compared the situation to the U.S. market, where procedures are complex, costly, and subject to strict oversight.

He suggested that Vietnam should aim to develop a more flexible and business-friendly framework to encourage FDI listings.

Beyond valuations and procedures, he highlighted that many global corporations consider listing as part of broader strategies, such as establishing a listed legal entity in the host country to support ownership structures or long-term development goals.

Thus, the decision to list is not purely financial but also strategic and governance-related.

Managing risk

Nguyen Son, chairman of the council of members at the Vietnam Securities Depository and Clearing Corporation, stressed the need to increase the supply of quality stocks on the market.

He acknowledged both domestic and global factors have contributed to the limited new supply.

Vietnam’s stock market capitalization remains relatively small, and the quality and scale of listed assets have not changed significantly in recent years.

“We cannot continue with the current level of supply. Encouraging FDI companies to convert and list on local exchanges will create a level playing field,” Son said.

Although more than 10 FDI enterprises have previously listed, with varying degrees of success, the pace of new listings has slowed over the past decade.

Son underlined that these companies, once converted into joint-stock firms, must operate under Vietnamese enterprise law.

However, the process carries risks that must be managed, such as potential 'exit strategies' where firms list only to divest, poor corporate conduct, transfer pricing, inflated asset values, non-transparent financial reporting, or even instances where company leaders flee.

Ha Vo Bich Van highlighted the need for a robust legal framework to manage risks and protect investors.

This includes setting specific criteria for FDI enterprises, such as a minimum of two to three years of operation in Vietnam, revenue and profit growth metrics, and existing technology transfer. Adjustments to charter capital requirements may also be necessary.

She proposed implementing lock-up mechanisms for foreign founding shareholders, possibly for three to five years, to prevent rapid divestment after listing.

Van also stressed that enabling FDI listings is not simply about amending laws or easing requirements. A possible starting point could be a listing sandbox, supported by legal risk-mitigation tools, a dedicated IPO (initial public offering) support center, and adoption of simplified international financial reporting standards to reduce compliance costs.

Temporary tax incentives for successful listings could further attract high-quality FDI firms to Vietnam’s capital market sooner rather than later.

Other proposed safeguards include mandatory independent audits, rigorous valuation procedures to ensure listed stock prices reflect actual value, strict business and financial reporting oversight, enhanced technical monitoring systems, early-warning mechanisms, and integration with national business and citizen databases.

Successfully listing more FDI enterprises would help position Vietnam’s stock market and the country more broadly as an emerging international financial hub.

New opportunities for investors

Most experts agree that the addition of FDI enterprises would diversify Vietnam’s stock market, enrich its product offerings, attract both domestic and international investors, and enhance market capitalization and liquidity.

Van projected that an anticipated upgrade of Vietnam’s market status could trigger a new wave of FDI listings, especially from major companies from the U.S., Japan, and South Korea.

Policies such as easing foreign ownership limits, especially in banking, represent a more open market approach for foreign capital and send a strong signal of readiness for FDI enterprise participation in the stock market.