HÀ NỘI – The State Securities Commission (SSC) has allowed Domesco Medical Import Export Joint Stock Corporation (Domesco) to increase its foreign ownership to 100 per cent, a move that shows Việt Nam’s willingness to open up to more foreign capital.

This information was confirmed by the company.

Foreign stakes in Domesco are at the current limit of 49 per cent, of which Chile’s CFR International SpA holds 45.9 per cent.

Domesco is the third-largest listed drug company, with a market capitalisation valued at nearly VNĐ3.3 trillion (US$148 million) as of yesterday.

This is the third company which the SSC has allowed to lift the foreign holding limit, after Việt Nam Dairy Product JSC (Vinamilk), the largest listed company, and Everpia Vietnam,.

The pharmaceutical industry is one of the fast-growing sectors in Việt Nam, appealing to foreign investors as a rising middle class in the country spends more on healthcare.

Offshore ownership of many local drug makers is already at or near the limit, creating pent-up demand from foreign investors.

Foreign holdings in DHG Pharmaceutical and Imexpharm Pharmaceutical have also reached the limit. The current foreign holdings ratio in Traphaco is around 46 per cent.

According to a report by BMI Research, Việt Nam’s pharmaceutical market is expected to rise from $4.2 billion in 2015 to $7.2 billion by 2020 and to maintain double-digit annual growth through 2025.

Investments in local healthcare companies have returned 46 per cent in 2016, the best performance among 10 industry groups on the HCM Stock Exchange, data on Bloomberg showed.

Prices of Domesco’s shares tripled this year to a record high of VNĐ96,000 a share on September 1.

The biggest listed pharmaceutical company, DHG, has risen 53 per cent. Imexpharm, Traphaco and Cửu Long Pharmaceutical, which round out the five biggest drug companies on the HCM Stock Exchange, are up between 80 and 147 per cent.

These companies performed well this year. DHG Pharmaceutical posted a net profit of VNĐ300 billion in the first half of this year, up 15 per cent year-on-year. Domesco earned VNĐ81 billion in net profit, up 21 per cent. Profits of Traphaco and Cửu Long Pharmaceutical were up 27 per cent and 37 per cent, respectively.

In the pharmaceutical market, only Domesco plans to scrap its foreign ownership limit.

Market insiders expect other local drug companies to follow Domesco and allow more foreign ownership. If this happens, merger and acquisition (M&A) activities in the pharmaceutical industry will likely be more vibrant. – VNS