No pre-funding required for foreign institutional investors to purchase Vietnamese stock from November 2

Foreign institutional investors (FIIs) are permitted to buy shares on Vietnam's stock market without requiring sufficient fund at the time of purchase, according to the Circular No.68 issued by the Ministry of Finance on September 18.

Article 9a from Circular No. 68  states that “The trading of shares by foreign institutional investors without requiring sufficient funds when placing buy orders.”

This move is expected to expedite the process of elevating Vietnam's stock market from frontier to secondary emerging market status, as per the FTSE Russell criteria.

The new circular, which will take effect from November 2, amends and supplements some provisions regulating securities transactions on the securities trading system; the clearing and settlement of securities transactions; and the operations of securities companies (SCs) and information disclosure on the stock market.

According to the circular, securities companies must assess payment risks of foreign institutional investors to determine funds required when placing stock purchase orders, as agreed upon by both parties.

In cases where a FII fails to fully pay for the share purchase transaction, the payment obligation for the shortfall is transferred to the SC where the FII placed the order, through its proprietary trading account, except as regulated in Clause 5 of the Article, the new circular states.