Strategy: NVDRs — Thailand as a template for Vietnam

NVDRs — Thailand as a template for Vietnam

Non-voting depository receipts appear to be within sight following recent changes to the legal code. As always, the devil will be in the details of implementation, and subsequent guidance on NVDR implementation will be key to a successful rollout, in our opinion. We think that Thailand, which has 20 years of experience with NVDRs, offers an excellent example for Vietnam. As such, we reached out to our colleagues at Yuanta Thailand to obtain a better understanding of Thai NVDRs, which are both widespread and popular, accounting for 43-47% of foreign stock trading there.

NVDRs should be highly beneficial for Vietnam’s stock markets if they are properly implemented. Benefits include: 1) substantial foreign inflows due to strong appetite for NVDRs in attractive full-FOL stocks, 2) positive implications for emerging markets inclusion, and 3) higher index weightings for Vietnam than would have otherwise been the case. We believe that full-FOL stocks should rise as NVDRs are rolled out. However, FOL premiums are likely to tighten substantially in our view. The NVDR story has its risks, but overall we believe it supports our positive market outlook heading into 2021.