NHNN will enforce the appropriate monetary policy to attract foreign capital and develop the stock market
In his speech at the Conference, Deputy Governor of the State Bank of Vietnam Pham Thanh Ha mentioned that the development of the stock market plays a crucial role and has significant implications for the development of the economy, as it supports businesses in raising capital through issuing bonds and stocks to meet the capital needs for investment, production, and business activities.
Based on closely following the directions of the Government and the Prime Minister as the state management agency for monetary, banking, and foreign exchange activities, the State Bank of Vietnam (SBV) has actively tracked macroeconomic developments and monetary trends to flexibly manage and proactively implement monetary policies. It has timely coordinated with the Ministry of Finance and related ministries in the coordination of monetary policies, fiscal policies, and other policies to contribute to macroeconomic stability, inflation control, and support economic growth. Consequently, it supports the development of the stock market towards the goal of upgrading the stock market from a frontier market to an emerging market.
Deputy Governor of the State Bank of Vietnam, Pham Thanh Ha, presenting a report at the conference – Photo: VGP/Nhat Bac
The Deputy Governor emphasized that the SBV always pays attention and actively cooperates with the Ministry of Finance in finding solutions to serve the upgrade of the stock market. The SBV has cooperated with two rating agencies to address questions and concerns from investors related to the banking sector, as well as step-by-step develop the foreign exchange market and provide necessary liquidity support to meet the increasing capital needs of investors, especially foreign investors.
In implementing the directions of the Prime Minister to jointly support the safe, transparent, efficient, and sustainable development of the stock market in 2024 and the subsequent years, the SBV will closely monitor market fluctuations and domestic and international economic situations. It will closely coordinate with fiscal policies to proactively and flexibly manage synchronized monetary policy tools and solutions to control inflation, contribute to macroeconomic stability, and promote sustainable economic recovery.
The SBV will continue to flexibly manage open market operations to ensure liquidity for the system of credit institutions. It will also actively manage interest rates and exchange rates that are suitable and balanced with macroeconomic stability, inflation, and monetary policy objectives. The SBV will manage the growth of credit volume and structure reasonably to meet the credit capital needs of the economy, contributing to inflation control and supporting economic growth.
According to the Deputy Governor, together with policies attracting domestic and foreign resources and capital to the stock market, the proactive and flexible management and synchronized monetary policy tools of the SBV, which are suitable for the actual situation, will contribute to higher effectiveness in attracting foreign capital and help build confidence for investors in a stable business environment. It will also lay the groundwork for attracting more foreign capital for investment and development of the stock market in the future.
However, in the context of medium and long-term capital needs of the large-scale economy, which mainly relies on the banking system, medium and long-term credit accounts for a considerable proportion and poses pressure and risks to the system of credit institutions when the capital source is mainly short-term. To develop a coordinated, transparent, and sustainable financial market, stable and safe operation, with a reasonable and balanced structure, and positive coordination between the money market and the capital market, the SBV recommends that the Ministry of Finance and the State Securities Commission continue to study, review, and improve the legal framework for the stock market in general and the bond market in particular. This will create favorable conditions for credit institutions to issue stocks and bonds in the market, and at the same time, coordinate with relevant ministries in implementing synchronized solutions for the development of the stock market.
In addition, diversification of market participants is also suggested, encouraging funds, insurance companies, and foreign investors to participate more deeply and widely in the market.
At the conference, Mr. Luu Trung Thai, Chairman of the Board of Directors of Military Bank (MB), stated that MB evaluates the first prerequisite factor for promoting market development and improving access to capital for businesses is the macroeconomic factor managed by the government.
Regarding MB’s participation in the stock market, the bank has been involved since 2011 and has attracted capital for development and growth since then. MB’s market capitalization is currently about 120,000 trillion VND, with 150,000 investors as shareholders in the market.
“We have implemented various plans to issue shares and distribute annual dividends to supplement capital, maintain and expand the capital scale, especially to increase business capital at Tier 2. This is crucial for credit institutions like MB to be able to meet the capital needs for growth,” emphasized Mr. Luu Trung Thai.
Mr. Luu Trung Thai, Chairman of the Board of Directors of Military Bank, presenting a lecture on “Promoting the Development of the Stock Market in Depth, Enhancing Access to Capital for Businesses” – Photo: VGP/Nhat Bac
Based on the report of the State Securities Commission, MB agrees with solutions to promote development in depth and improve access to capital for businesses. From MB’s perspective, the bank sees four issues with recommendations.
First, increase the scale of the market. Currently, the size of the stock market accounts for about 56-58% of the GDP of developing countries. I see that the average index ranges from 50-80%, so we are at a fairly good level. The first issue is to increase the scale of the market.
The second issue is to increase the quantity of commodities and the number and quality of participating businesses in stock listings.
The third issue is to increase the number and quality of investment banks in the market through various solutions.
Finally, upgrade trading systems and legal frameworks to attract investors.
Mr. Le Ngoc Lam, CEO of BIDV, highlighted the need to encourage the development of the green bond market, which can attract investment capital to Vietnam.
Mr. Le Ngoc Lam, CEO of BIDV, delivering a speech on “Green Bonds – Driving Sustainable Growth” – Photo: VGP/Nhat Bac
Accordingly, BIDV recommends improving the legal framework related to green bonds, including: (i) Classifying and confirming national green projects to apply incentive policies that need to consider the similarity between Vietnam’s green criteria and international standards. This will facilitate businesses in project implementation and attract domestic and foreign investment according to the same standard system.
In addition, consider regulations on green criteria, including corresponding levels of incentives for different policy categories. In this way, companies issuing green bonds can gradually access incentive policies and establish goals/motivation for sustainable growth. At the same time, (ii) issue guidelines for issuance and post-issuance reporting activities for green bonds, taking into account the specific provisions between activities of credit institutions and economic organizations.
