October 17, 2023
HANOI – Việt Nam is working hard to have its stock market upgraded from frontier status to an emerging market by 2025.
Vũ Thị Chân Phương, Chairwoman of the State Securities Commission of Việt Nam (SSC), said that upgrading the status of the stock market is one of the major targets of the Government. The country hopes to obtain the emerging market status before 2025.
According to Phương, in terms of the legal framework, the 2019 Securities Law, the 2020 Investment Law, the 2020 Law on Enterprises, and the documents guiding their enforcement have created optimal conditions for investment flows, facilitated access to information in English as well as registration and opening accounts of investors, and enhanced market transparency, thus gradually meeting the criteria for market upgrade.
Aside from growing in terms of size and liquidity, Việt Nam’s stock market has also become increasingly transparent and healthy thanks to the stringent settlement of violations. A number of businesses have also proactively released information in English. Among them, all of those in the VN30 Index group, which measures the 30 largest stocks by market capitalisation, have disclosed information in English.
Transparent regulations improve market viability, as seen in the Government’s Decree No 155/2020/NĐ-CP and the Finance Ministry’s Circular No 96/2020/TT-BTC.
The SSC would revise legal documents to improve the transparency and sustainability of the stock market, Phương noted.
Lyndon Chao, a representative of the Asia Securities Industry and Financial Markets Association (ASIFMA), said Việt Nam was one of the fastest growing economies in Asia, posting the world’s fastest growth. It was also a beneficiary of global supply chain diversification and a rising middle class.
He said global investors were increasing investment in Asia, and Việt Nam would be an outstanding destination in the future as authorities reform the market to provide easier access to global fund managers.
Financial experts have pointed out that MSCI and FTSE Russell, the two most important international organisations in stock market classification, still list Việt Nam as a frontier market. Meanwhile, neighbouring countries like Thailand, Indonesia, Malaysia, and the Philippines have for years been designated as emerging markets.
Many foreign investors see the value in Việt Nam’s stock market and want to invest in the future here. What the country needs to do now is to keep promoting the market’s transparency and provide more favourable conditions for foreign investors, according to the experts.
If MSCI and FTSE Russell upgrade the stock market of Việt Nam to an emerging one, billions of dollars are expected to pour into Vietnamese stocks each year.
According to major international rating agencies and financial institutions, the country has made improvements and satisfied many important criteria. However, two issues still need major improvements in support of foreign investors. The improvements include the prefunding requirement and the foreign ownership limit, both of which require practical coordination among stakeholders such as the State Bank of Việt Nam and the Ministry of Planning and Investment.
Experts have also highlighted the importance of securities companies and banks, saying the upgrade will help expand the market size considerably, so operating systems and risk management processes must be top notch to meet transaction-related requirements.
In addition, the SSC should press on with perfecting the new IT system for the stock market, diversifying and bettering the quality of products in the market to attract foreign investors, and developing products related to green growth and sustainable development. VNS