Vietnamese equities are outperforming the rest of Southeast Asia ahead of a long-awaited move in September by the government to finally dismantle a 49 percent foreign ownership cap on a number of listed companies.

The benchmark VN index is leading gains in Southeast Asia so far this year, followed by the Philippines. The market has climbed 13.4 percent, with investors picking up shares in big companies. Vietcombank, the largest firm by market value, has jumped 55.2 percent while top insurer BaoViet Holdings has soared 90.63 percent. In the second quarter, net foreign buying of Vietnamese shares rose to $135 million, the highest for any quarter since 2007.

The economy is growing at its fastest pace since 2008, and the country's leaders hope to turn Vietnam into a manufacturing hub with the presence of tech giants such as Samsung Electronics and Microsoft. The government wants foreign investors to capitalise the country's companies and help fund that transformation. Adding to Vietnam's allure, its stocks are the second-cheapest in Southeast Asia, after Singapore shares.

"Foreign investors recognise that the market is cheap, and that the economy is arguably in the best shape it has ever been in," said Kevin Snowball, CEO of PXP Asset Management in Ho Chi Minh City. "In our opinion the foreign limit reforms put Vietnam on the cusp of a breakout."

Countering the optimism is the market's small size and low liquidity. Market capitalisation is around an eighth of Thailand's and a sixth of Indonesia's, making Vietnam relatively more vulnerable to investor speculation. Foreign investors are also focusing their share purchases in the country's top firms and have yet to show significant interest in the hundreds of other smaller, domestic companies. So far, foreign investors have hit the ownership threshold of just 30 listed companies.