Speaking at the Conference on Development of the Securities Market in 2024 on February 28, Prime Minister Pham Minh Chinh highlighted some notable achievements of the Vietnam Stock Market (VSM), with an emphasis on scale and liquidity.
Specifically, the market capitalization of the VSM has reached nearly $200 billion, exceeding many Asian markets such as the Philippines, Qatar, Kuwait… or European markets such as Greece, the Czech Republic, Hungary… The average liquidity reached nearly $700 million, equivalent to Indonesia, Malaysia, Singapore and second only to Thailand in the ASEAN bloc.
Liquidity is also a plus or minus point when rating agencies and market grading institutions such as FTSE Russell and MSCI look at and evaluate. With the above data, the liquidity scale of Vietnam’s Stock Market has reached the ASEAN region, a result that would be difficult to achieve without the “rescue” initiative to resolve the backlogs of orders at the Ho Chi Minh City Stock Exchange (HOSE) in the 2020-2021 period.
Specifically, since the fourth quarter of 2020, the trading system at HOSE has been frequently overloaded, “stuck” and orders being backlogged for a long time. This situation has negatively affected market sentiment, investor rights, and especially the reputation of Vietnam’s Stock Market in the eyes of foreign investors and rating agencies.
On March 6, 2021, at the “Dialogues of 2045” Conference, with the message “Trust in the private economy”, billionaire Nguyen Thi Phuong Thao presented an initiative to use domestic resources and capacities to resolve the backlog of orders on HoSE, instead of waiting for foreign experts and the Korean Exchange (KRX) system to operate. The government supports, the Ministry of Finance “nodded”, Sovico cooperates with FPT to launch the “100 days to rescue HOSE” campaign.
On schedule, after 100 days, the new trading system of HOSE from the initiatives of billionaire Nguyen Thi Phuong Thao and Truong Gia Binh – Chairman of the leading technology corporation FPT, Sovico and HDBank together with FPT officially launched, with the ability to process 3-5 million orders per day, more than 3 times the old system. Immediately after that, liquidity on the VSM exploded, with trading volumes surpassing the threshold of VND 30,000 billion and record levels of over VND 56,100 billion recorded. By now, the average liquidity scale has reached the level mentioned above by the Prime Minister.
Ms. Nguyen Thi Phuong Thao and Mr. Truong Gia Binh are both leaders of listed companies in the VN30 group on HOSE, with tens of thousands of domestic and foreign institutional and individual investors as shareholders; typical businesses that bring value and trust to investors, contributing to the development of Vietnam’s Stock Market.
Flexible solutions and mechanisms
At the recent conference, Mr. Truong Gia Binh – Chairman of FPT said: “We would like to express our gratitude to the government, the Ministry of Finance, and the State Securities Commission for giving us 100 days to rescue HOSE”.
Expressing gratitude, because under the old mechanism and solutions, initiatives like those of businesswoman Nguyen Thi Phuong Thao, or private economic organizations such as Sovico, HDBank, or FPT, were very difficult to participate in, to assert their capacity and value contribution in the above campaign. And this is also a typical example of flexibility in solutions and mechanisms to strive for upgrading Vietnam’s Stock Market.
According to the criteria of FTSE and MSCI, Vietnam’s Stock Market still has some criteria that have not been met and need adjustment, according to the annual update report in 2023. In addition to criteria on payment, product diversification, and efficiency of operation systems, both organizations emphasize criteria on openness to foreign investors.
Currently, the ownership ratio of foreign investors in Vietnam’s listed enterprises has certain limits, especially the “room” of ownership which is limited to 30% in commercial banks. Meanwhile, the “room” in banks such as ACB, HDBank, MB, Techcombank… is either no longer available or has been almost filled. In addition to the rating criteria, creating a supply source, attractive addresses such as in the above banks to attract foreign capital when upgrading is also a reality but almost no longer available.
In the face of this reality, as well as towards meeting the upgrading criteria of the market, at the conference on February 28, experts have made notable proposals, a flexible direction like the above initiative and the campaign to resolve the HOSE backlog.
Specifically, the First Secretary of the Korean Embassy in Vietnam suggested a flexible solution: relaxing the limit of foreign ownership to increase the supply of shares for foreign investors, through non-voting depository receipts to meet the state management goals for each industry and profession.
Thus, to meet the criteria, Vietnam can be flexible in mechanisms, have new solutions or directions to meet the goal of upgrading the Stock Market. A goal that Prime Minister Pham Minh Chinh emphasized the viewpoint of “Saying and doing”.
“We are determined to upgrade Vietnam’s Stock Market from the frontier to the emerging stage in 2025” – the Prime Minister emphasized at the conference, along with setting a date to report on specific tasks in May, before the expected evaluation period in June and September 2024 by MSCI and FTSE.
