(Bloomberg) -- Mobius Capital Partners LLP has raised its holdings of Vietnamese stocks on expectations that the market will be upgraded to emerging-market status.
Local assets are attractive, thanks to recent regulations to scrap pre-funding requirements for foreign stock investors, according to Carlos Hardenberg, Mobius Capital’s founding partner. The country’s strong economic growth is another plus, he said.
The fund recently added exposure to Vietnam as the country “is showing strong signs of recovery, driven by pro-business leadership, advancements in manufacturing, and stable real estate and banking sectors,” Hardenberg said in an interview. It also boosted its holdings of Malaysian equities.
Global funds bought $26.8 million of Vietnamese shares on a net basis on the first day of October, marking a positive start for the market after eight months of outflows. Emerging market investment manager Franklin Templeton named the country a “frontier star,” citing its growing industrial developments.
Vietnam’s stock benchmark has risen about 14% this year, broadly in line with a regional gauge, as a removal of the pre-funding requirements raises the case for an upgrade by FTSE Russell. Overseas investors no longer need to transfer 100% of funds into domestic accounts before buying securities under a new rule which takes effect Nov. 2.
Read: Vietnam Scraps Stock Pre-Funding Rule With Eye on Market Upgrade
The index operator will likely upgrade Vietnam’s frontier status within the next 12 months, fueling more than $500 million of passive inflows, and MSCI Inc. may follow suit, according to JPMorgan Chase & Co.
The removal of pre-funding requirements for foreign investors “has boosted liquidity as the country progresses toward emerging market status,” Hardenberg said.
Vietnam’s robust economic growth and its position as a beneficiary of supply chain reconfiguration are also a draw. The International Monetary Fund expects the nation’s gross domestic product to expand 6.1% this year, supported by external demand, resilient foreign direct investment and accommodative policies.
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