A big step forward in the national development strategy

Although still “considered” a Frontier Market by market rating organizations around the world, in recent years the Vietnamese stock market has been evaluated very positively by investors. foreign institutional investors and are compared by these investors to a number of other stock markets in the Emerging Market category. This has been shown by the fact that a number of foreign investment funds that usually only specialize in investing in emerging markets have also begun to learn about and invest in the Vietnamese stock market.

In the global context of many economic and political fluctuations, global investors in many fields have shown great interest in Vietnam. With Vietnam’s bright spots showing economic growth and a stable socio-political environment, Vietnam’s national credit index is assessed by credit organizations such as S&P as promising and stable (rank BB+). Moody’s in the past two years has also ranked Vietnam as Ba2 – promising and stable.

A big step forward in the national development strategy - Photo 1

In the field of securities, Vietnam’s stock market currently accounts for the highest proportion in frontier market indexes, up to nearly 30% in MSCI’s frontier market index and 38% in FTSE’s index. Russell. Other markets in the frontier market category only have a proportion of around 10%.

With the scale of capitalization and liquidity, Vietnam’s stock market has also grown beyond many other markets in the emerging market sector. The total capitalization of businesses listed on stock exchanges in Vietnam most recently reached nearly 200 billion USD, larger than many other Asian markets such as the Philippines, Qatar, Kuwait or Europe like Greece. , Czech Republic, Hungary,… can be compared to the capitalization scale of some emerging markets such as: Thailand is 475 billion USD, Indonesia is about 720 billion USD, and Malaysia is about 390 billion USD.

Regarding trading liquidity, Vietnam’s stock market has achieved an average liquidity of around 1 billion USD in the past two years and most recently reached nearly 700 million USD, equivalent to Indonesia, Malaysia, and Singapore, which is second only to Thailand in the ASEAN bloc.

MEET THE SAME EFFORT TO MEET THE UPGRADE CRITERIA

Vietnam’s stock market is currently classified by two market rating organizations, MSCI and FTSE Russell, into Group 3 – Frontier Markets. Particularly, FTSE Russell put Vietnam on the list of groups waiting to be upgraded to Group 2 – Emerging Markets. At the review period in September 2023, FTSE Russell continues to keep Vietnam on the watch list for upgrading to secondary emerging market. Although there are comments that progress in improving the criteria for upgrading is still slow, FTSE Russell also noted the positive commitment of senior leaders of Vietnam’s capital market management agencies. in the work of upgrading the market.

However, in the fourth quarter of 2023, direct contacts between market members and the State Securities Commission with MSCI and FTSE, these two rating organizations, outlined a number of specific criteria. to guide authorities and members of the Vietnamese stock market in their efforts to come up with faster solutions. It emphasizes three important conditions that the Vietnamese stock market needs to achieve.

First, expand without restriction the ownership ratio of foreign investors in Vietnamese companies. This limitation is reflected because some stock codes in industries, such as banking, retail, technology,… still limit foreign ownership but are favored by institutional investors. There is a lot of interest from foreign countries and now there is no more “room”. However, in addition to specific industries with elements of national financial security or high-tech security, the legal framework of the Vietnamese market has allowed companies to open ownership rates to foreign investors. up to 100% for businesses not in the list of conditional business lines. Therefore, listed businesses need to readjust their business registration to propose loosening foreign ownership limits.

A big step forward in the national development strategy - Photo 2

Second, adjust or remove pre-transaction margin requirements, especially for foreign institutional investors. Currently, according to regulations, foreign investors when participating in stock transactions in Vietnam must comply with regulations on pre-transaction deposits. Eliminating pre-trade margin requirements will increase the attractiveness to foreign institutional investors and will help upgrade the Vietnamese market closer to reality.

Third, improve and strengthen information disclosure in English, from authorities and listed companies as well as market members. Publishing information in English (including: market regulations; information of exchanges, depository centers; information about businesses) is essential to create equality with investors. Foreign investment.

UPGRADEING THE MARKET NEEDS TO BE INCLUDED IN THE DEVELOPMENT STRATEGY

In addition to the main conditions mentioned as prerequisites, foreign institutional investors as well as MSCI and FTSE also outlined a number of other criteria that the Vietnamese stock market can further improve to continues to advance to become a more advanced market in the eyes of investors.

First, liquidity. The stock market needs to have a sufficiently high level of liquidity, that is, the ability to buy and sell stocks and financial assets easily and effectively. Regarding market liquidity criteria, over the years, Vietnam’s capital market has continued to grow in transaction liquidity. During the Covid-19 period, the Vietnamese stock market has witnessed strong growth in trading liquidity and specifically online transactions. However, some trading conditions are still being proposed by market participants to improve, making trading more convenient, for example, the condition of being able to sell pending securities, or the possibility of having can borrow and lend securities…

Chairman of the Board of Directors of Ho Chi Minh City Securities Company (HSC). The full content of the article was published in Vietnam Economic Journal No. 12-2024 published on March 18, 2024. Dear readers, we invite you to read hereThis

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https://postenp.phaha.vn/chi-tiet-toa-soan/tap-chi- Kinh-te-viet-nam

A big step forward in the national development strategy – Photo 3

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