Foreign individuals are allowed to invest in Vietnamese securities

In this article, we focus on the indirect investment management of non-resident individuals in China for reference.

In China, two currencies are used: the Chinese yuan and the Hong Kong dollar in the Hong Kong Special Administrative Region. According to the impossibility triad mentioned above, while the RMB is controlled by managing capital movements, the Hong Kong dollar is governed by the choice of free capital mobility and independent money supply.
There are some suggestions for Vietnam to relax the paperwork for foreign individual investors when investing in Vietnam's stock market.

In China, there are two different types of stock and both are traded on the Shanghai and Shenzhen stock exchanges. Class A shares are listed in yuan. Only Chinese citizens and foreign organizations eligible to qualify for investment (QFII) will be allowed to trade this type of stock. China's foreign exchange control over QFIIs has been analyzed in a paper published in the November 30, 2015 Investment Review.

The second type of stock is Class B - quoted in USD (at the Shanghai Stock Exchange) and Hong Kong dollars (at the Shenzhen Stock Exchange). All foreigners and Chinese citizens are allowed to trade this type of stock from the appropriate foreign currency accounts. The B-stock market is small in scale, many of which are in poor quality and stock prices are less volatile.

Thus, in the Chinese mainland, foreign individual investors are only allowed to buy Class B shares, at prices quoted in US dollars and Hong Kong dollars - currencies floating freely. In this regard, the authorities of China do not have to manage foreign exchange for the renminbi as foreign individuals invest indirectly.

While Class B shares are structured as the main product for foreigners investing in China, most foreigners prefer to invest in mainland Chinese companies listed in Hong Kong. Listed shares in Hong Kong allow all types of investors to be traded. These companies are divided into 3 groups. "H shares" are issued by the company in the mainland and transacted in the Hong Kong market (therefore, the same business may have Class A, B and H shares). "Red Chip" is state-controlled, technically registered in Hong Kong, but most of its revenue is in the mainland. "Chip P" is a company registered in Hong Kong, but owned by private entities in the mainland.

In the long run, regulations on investing in class A shares may be relaxed, but it may take at least another decade. Currently, foreign individual investors are only allowed to invest in the remaining shares.

Recently, there are some suggestions for the State Bank of Vietnam to relax the requirements of paperwork for foreign individual investors when investing in the stock market of Vietnam.

However, compared to China, Vietnam's control over foreign individual investors is considered much more liquid. In Vietnam, although the foreign ownership limit is applied, foreign individual investors are allowed to invest in all kinds of securities listed in Vietnam dong, which are allocated services both inside and outside the stock exchange.

When opening a securities trading account, foreigners do not have to submit many papers. However, foreign investors must submit a variety of documents when opening an indirect investment account at a bank. This is considered necessary work to combat money laundering under Vietnam's commitment to the international community.