A Market Turning Point
At the recent scientific conference titled “Solutions to Enhance the Status of the Vietnamese Stock Market,” there was a consensus among many experts that upgrading the market would mark a new chapter of development for the Vietnamese stock market.
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Vietnam could attract 25 billion USD in new investment if the stock market is upgraded.
Ms. Vu Thi Chan Phuong, Chairwoman of the State Securities Commission, stated that the market upgrade depends on the objective assessment of international rating organizations through the practical experiences of foreign investors. Therefore, with the attention and guidance of the Government and the Prime Minister, in addition to the highest efforts of the regulatory body, the participation and determination of relevant ministries and departments are essential to achieve the expected results.
Moreover, the upgrade also depends on the actual experiences of foreign investors when participating in the Vietnamese market. This requires the joint efforts of market participants in providing services, listed companies, and especially large listed organizations in terms of transparent information disclosure, English-language information disclosure, and good corporate governance practices.
Mr. Andrea Coppola, the World Bank’s Lead Economist in Vietnam, also noted that the upgrade will significantly enhance Vietnam’s market position, providing full access to foreign investors, with sufficient scale and liquidity to attract investments comparable to many developing countries at similar stages of development. The World Bank estimates that successfully upgrading the stock market could attract up to 25 billion USD in new investment from international investors by 2030.
Removing Bottlenecks
Several solutions have been proposed to accelerate the market upgrade process. Dr. Nguyen Van Phung, former Director of the Large Enterprise Tax Department (General Department of Taxation), believes that the rapid implementation of the KRX system is a crucial step. Additionally, issues such as implementing the requirement for pre-funding of trades, improving the foreign ownership limit (FOL), and the quality of products in the market need to be addressed.
Based on this, Dr. Nguyen Van Phung suggests further clarifying and narrowing down the list of industries with foreign ownership restrictions in relevant laws; researching and developing mechanisms, policies, and solutions to alleviate difficulties for businesses and the market; and enhancing the review and strict monitoring of securities issuance. Additionally, he emphasizes the need to strengthen inspections, audits, and supervision of the proper use of funds according to approved issuance plans; and to increase inspections and monitoring of information disclosure by companies raising capital in the market.
Mr. Nguyen Khac Hai, Director of the Legal and Compliance Control Division of SSI Securities Corporation, said that with the upgrade to emerging market status, according to SSI’s preliminary estimates, the capital inflow from ETF funds could reach 1.6 billion USD, excluding the capital inflow from active funds. FTSE Russel estimates that the total assets from active funds are five times higher than those from ETF funds.
Consequently, FTSE Russel included Vietnam in the watchlist for upgrading to emerging market status in 2018, with specific and detailed assessments of the requirements that Vietnam needs to meet for the upgrade. The new qualitative criteria are the primary hurdles, with the most significant concern for FTSE Russel in making the upgrade decision related to the clearing and settlement process, the transfer of settlement obligations (transfer of shares at the time of payment), and the handling of failed trades.
In Directive No. 12/CT-TTg dated April 21 on key tasks and solutions to promote socio-economic development, the Prime Minister requested the Ministry of Finance to urgently implement necessary measures to upgrade the Vietnamese stock market from frontier to emerging market status by 2025. Previously, the Prime Minister assigned the Ministry of Finance, the State Securities Commission, the State Bank of Vietnam, and the Ministry of Planning and Investment to coordinate, promptly address, and report on the resolution of pending issues within their respective responsibilities to meet the market upgrade criteria by June 30.
