TAIPEI, Taiwan -- Foreign portfolio investors in fast-growing Vietnam are secretly happy to see their best ally in government stepping down.
Soon-to-depart Prime Minister Nguyen Tan Dung had stirred up the Vietnamese Communist Party with a bid to be its chief -- the most influential position in Vietnam. But the current general secretary wanted to keep the job and forced the prime minister to drop out.
Why celebrate Dung's departure? It's because the half-year run-up to the selection of a party head had snarled the opening of stocks to majority foreign investment.
Now the government will figure it's safe to proceed in some form without risking rebuke from a possible new leader who might want things done differently.
That's good news for foreign institutions with Vietnam exposure. They include HSBC Global Asset Management (HSBC) , financial services firm Schroder (SHNWF) , and Deutsche Bank (DB - Get Report) , operator of the db x-trackers FTSE Vietnam ETF.
"Received wisdom is that the direction of reform will be unchanged under the incoming administration, although the pace may slow," said Kevin Snowball, CEO of Ho Chi Minh City-based PXP Vietnam Asset Management.
"Given that reforms, particular those concerning the stock market, have come to a grinding halt over the past several months, it is unlikely that reforms can get any slower than currently," he said.
After about two years of deliberation, Vietnamese regulators issued a decree in June saying foreign funds could become majority owners for the first time in local stocks. Limits will go from a previous maximum of 49% up to 100%.
Foreign investors had looked forward to the decree as they eyed the country's fast growth and increasingly professional management of top firms such as dairy producer Vinamilk. Foreign funds made up about 15% of the market as of mid-2015.
Offshore buyers that hope to buy more Vietnamese shares include mainstream investment banks with exploratory positions now and emerging market funds now underweight to Vietnam.
But the party infighting had stalled crucial follow-up regulation to that decree, effectively keeping foreign ownership caps lower than expected.
Officials once shied away from letting in too many foreign funds, a way to keep capital onshore and protect the state's own massive investments in many of Vietnam's 865 listed firms. The Southeast Asian government had capped foreign investment at 49% to control sensitive sectors such as natural resources and telecommunications.
Dung has pushed for fast reforms in the state-controlled economy, which grew an especially fast 7% in the previous quarter. Under his watch, Vietnam vied with a slower-growing China and other Asian countries to be a magnet for foreign direct investment in export manufacturing.
Vietnam has taken measures to let in foreign capital over the past 25 years, after wars with the U.S. and China left much of the country in ruins. Like China since 1978, relatively poor Vietnam depends on foreign capital to grow.
The current party head Nguyen Phu Trong, who will stay another five years, also endorses Vietnam's economic opening as enshrined in a development blueprint. But analysts say he will move more cautiously than Dung would prefer.
The outgoing prime minister of five years still had ground to cover in industrialization and privatizing state assets. Trong may pick up where he left off.
"If anything, Trong offers a chance for new leadership to emerge in Vietnam," French investment bank Natixis said in a research note this week. "Many consider Dung a reformist when he has not brought great change to the country."