Upgrade and improve the quality of Vietnam’s stock market
It is no coincidence that recently, the head of the Government, Prime Minister Pham Minh Chinh has repeatedly mentioned the need to implement solutions to upgrade the ranking. stock market from marginal to emerging.
In fact, according to experts, upgrading the market means improving the quality to meet the set criteria, thereby attracting a large amount of foreign capital, helping Vietnam’s securities to develop quickly, transparently and transparently. lasting.
Aggressively upgrade the market
Customers trade at a securities company in Hanoi. (Photo: VNA)
Recently, the issue of market purification and capacity improvement of the transaction system has been drastically directed by the Government. This shows that Vietnam is determined to improve the quality of the stock market. The improvement of market quality aims to protect investors, opening up opportunities for Vietnamese securities to upgrade from marginal to emerging.
The government headed by Prime Minister Pham Minh Chinh is very interested in the development of the capital market and the stock market; in which, there is the problem of upgrading the market.
Within the framework of an important trip to attend the ASEAN – US Special Summit, visit and work in the US and the United Nations, on the afternoon of May 16 (local time), Prime Minister Pham Minh Chinh had to visit the New York Stock Exchange (NYSE) – the largest stock exchange in the world.
Prime Minister Pham Minh Chinh hopes that the NYSE will pay attention to support and share experiences to contribute to promoting the development of an efficient and sustainable stock market in Vietnam, successfully building a regional financial center, at the same time, towards a sustainable, mutually beneficial partnership between NYSE and Vietnamese partners, contributing to promoting the Vietnam – US comprehensive partnership more and more substantive and effective.
Also on this occasion, the Prime Minister witnessed the awarding ceremony of two cooperation documents in the fields of finance, banking and investment funds between Vietnamese and US partners; in which, there is a cooperation document between the State Securities Commission of Vietnam and the NYSE on supporting market upgrading, building a mechanism for investors to participate in the two stock markets.
Previously, Prime Minister Pham Minh Chinh chaired a conference to develop a safe, transparent, efficient and sustainable capital market in order to stabilize the macro-economy and ensure major balances of the economy.
At this conference, Prime Minister Pham Minh Chinh also asked the Ministry of Finance to direct to immediately overcome the bottleneck situation and invest in technological innovation and application of digital technology; urgently implement necessary measures to upgrade Vietnam’s stock market from marginal to emerging to attract investment capital, especially foreign investment.
From an expert perspective, Mr. Dominic Scriven, Head of the Capital Market Working Group of the Vietnam Business Forum (VBF), said that the move to purify the market is a great effort and determination from the Government. Because, the goal of the regulator is to build and develop a safe, transparent and sustainable securities market. Therefore, purifying the market will contribute to ensuring the interests of businesses and genuine investors; increase the attractiveness of the stock market, attracting more investment capital flows both at home and abroad. From there, contributing to support the process of upgrading from marginal to emerging.
According to Mr. Pham Luu Hung, Chief Economist of SSI Securities Company (SSI), a series of moves to purify the market in recent years has brought the expectation that the upgrade process will be easier. Mr. Hung hopes that in the assessment of the Market Rating Organization (MSCI) next time, this organization will write some positive comments about what Vietnam has done.
According to Finance Minister Ho Duc Phuc, the Ministry of Finance is currently coordinating with international organizations to deploy solutions to soon upgrade Vietnam’s stock market according to the set roadmap by 2025.
Upgrading will attract tens of billions of dollars more
Analysts believe that the upgrade of Vietnam’s stock market from marginal to emerging will continue to be an important driving force of the market in the coming time.
Mr. Zafer Mustafaoglu, Head of Operations Division in Finance, Competitiveness and Innovation, East Asia – Pacific, World Bank, said that capital market development is an effort. long-term efforts and there is still much work to be done in Vietnam. The size of the capital market relative to GDP is growing and needs to be further increased. Not only that, but more importantly, the quality of Vietnam’s markets is currently not commensurate with its size, as evidenced by the fact that Vietnam still lags behind comparable countries in the region.
All other countries that Vietnam wants to keep up with in terms of development level are already in the emerging market group or higher, while Vietnam is still in the frontier market group. At the same time, Vietnam’s equity market accounts for over 30% of MSCI’s global frontier market index.
“Vietnam is like a middleweight boxer but is still competing in the lightweight group,” said Zafer Mustafaoglu.
According to Mr. Zafer Mustafaoglu, the goal of being upgraded to an emerging market has been put on the Government’s agenda. Upgrading to an emerging market is not only an improvement in status, but also signals a dramatic improvement in quality with a solid market foundation and behavior in the market.
Upgrading to an emerging market has also attracted the attention of high-ranking international investors to Vietnam. In the stock market, upgrading to an emerging market could bring in an additional $10 billion in new indirect investment for Vietnam; the first year alone can receive an additional 2 – 5 billion USD.
“We recommend that Vietnam continue to commit to accelerating its upgrade to an emerging market. This means that Vietnam also needs to be more open to international indirect investors, and at the same time improve quality. The information must be timely, reliable and more accessible; the infrastructure must also be efficient and friendly to investors, both domestically and internationally,” said Mr. Zafer Mustafaoglu.
Mr. Do Bao Ngoc, Deputy General Director of Kien Thiet Securities Vietnam, said that the Vietnamese stock market is not eligible to upgrade from the frontier market to the emerging market because we still lack many factors. .
According to Mr. Ngoc, the missing elements are that there is no exchange; lack of an independent payment center and many barriers to foreign investors; not yet agree on technology standards and game rules. If the missing factors are soon overcome, the Vietnamese stock market will be recognized as an emerging market and thereby will attract more foreign capital flows.
According to Mr. Nguyen Minh Tuan, General Director of AFA Capital Investment Joint Stock Company, the criteria for upgrading from the frontier market to the emerging market focus on two main factors: size and liquidity of the market. quantitative) and market access (qualitative).
In terms of size and liquidity, there are four criteria including: number of companies included in the Standard Index, total market capitalization, floating capitalization and market liquidity calculated as an annual trading value ratio, Vietnam has almost met 3 standards.
This is also considered a necessary and sufficient condition for Vietnam to ensure quantitative standards. Vietnam’s main problem is qualitative standards. In the latest ranking period in June 2021, there are 9 criteria that Vietnam has not yet met.
The criteria are not met such as: ownership rate, restrictions on ownership and equal rights of foreign investors; the ease of capital mobility and the degree of freedom of the foreign exchange market; the depository and payment system still has the problem of order congestion, as well as overdraft tools, money advance for transactions; the ability to convert when there are transactions not through the floor and payment in kind must be approved in advance by the Securities and Exchange Commission.
According to the process, in addition to reviewing the criteria, MSCI will need to have an assessment based on a survey of international investors on the market. Financial expert Phan Le Thanh Long said, currently, the market ranking we want and focus on the most is from MSCI. If a country’s stock market falls into one of the MSCI ratings at different levels, the capital flows to which it is allocated are very different.
Currently, there are about 70 stock markets rated by MSCI; in which, there are 24 stock markets in the group of marginal markets; 23 emerging markets and 23 developed markets.
The stock market is greatly influenced by cash flow. The growth of the stock market depends a lot on the story of money coming in or going out.
“It is necessary to build a more substantive market. This brings great benefits to Vietnam’s stock market and all members of the stock market benefit. A growth market must be of quality and value. businesses increased and “collected” large cash flows from large investment funds in the world. That is the big purpose of Vietnam’s stock market,” said Mr. Long.
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