BSC has recently made a forecast on the timeline for the upgrade of the Vietnamese stock market. According to BSC, in March 2024, FTSE will conduct an assessment and by September 2024, there is a possibility that the Vietnamese stock market will be officially considered for an upgrade by FTSE. And by September 2025, FTSE will formally upgrade the Vietnamese stock market to an emerging market.
Meanwhile, the possibility of being included in the MSCI watchlist will be considered by June 2025.
Among the qualitative criteria set by the rating agencies FTSE Russel and MSCI, the requirements from FTSE Russel are much simpler, mainly because FTSE Russel divides emerging markets into two categories depending on the development level of the market, namely Secondary and Advanced emerging markets. Vietnam has met all 5 criteria set by FTSE, while MSCI still has room for improvement in terms of foreign room for foreign investors…
Regarding quantitative criteria, FTSE requires payment cycle and settlement failure, while MSCI requires transferability and net settlement capability.
Regarding the issue of reserve agreement, according to the leaders of VSD, applying the Central Counterparty Clearing house (CCP) model with the approval of the State Bank of Vietnam, where the custodian bank must be a clearing member, will be the optimal solution to solve the pre-funding issue.
To address the foreign ownership ratio criteria, changes will need to be made to the regulations for each industry, restricted access lists to the market for foreign investors.
The regulations on foreign ownership ratio are currently governed by the Investment Law (Decree 31/2021/ND-CP guiding the implementation), Securities Law (Decree 155/2020/ND-CP guiding the implementation). In addition, the research and pilot application of non-voting depository receipts (NVDR) – the Thai stock market has implemented quite successfully – also needs to have mechanisms consistent with the provisions of the Enterprise Law.
A look at the external factors shows that the stock market of each country often performs positively before the official announcement of the market upgrade, with a significantly improved liquidity, as exemplified by the Chinese stock market, however, in 2018, China began its trade war with the United States, causing the stock market to experience a drop.
Afterwards, the stock market of this country continued to register impressive growth. After the approval of the upgrade was announced, liquidity and indices showed signs of decline in countries like Qatar and UAE.
For Saudi Arabia – a country with a prolonged transition period, consisting of 06 stages – liquidity decreased and the stock index showed a slight increase after the official approval of the upgrade was announced.
One thing to note is that the stock market situation also depends on the economic and social context, the political situation in each country at different times, and the upgrade factor is not the main condition that affects the stock market situation.
Meanwhile, the liquidity and performance of stock indices in Thailand and Malaysia have shown positive trends before being upgraded by FTSE from Secondary emerging market to Advanced emerging market.
This reflects the stability of the Advanced market compared to the Frontier/Unclassified markets, when being upgraded to Advanced by FTSE has helped these markets perform positively when receiving a large influx of capital from foreign investors in the context of the impact of the 2008 financial crisis still affecting the global market.
In Vietnam, BSC expects to attract $1.5 billion after the Vietnamese stock market is upgraded by FTSE Russell, and if MSCI also upgrades, it will attract an additional $2 billion.
Finally, the perspectives of relevant ministries and agencies in coordinating to promote the process of upgrading the market are also important.
