Vietnam’s stock market meets 7 of 9 criteria for upgrading the stock market

Vietnam's stock market nearly meets the level of emerging markets. Photo: Internet

The Government sets the goal of upgrading the Stock market from a frontier market to an emerging market by 2025.

According to Ms. Pham Thi Thuy Linh - Deputy Director of the Market Development Department of the State Securities Commission, the Government issued Decision 1726/QD-CP on the Stock Market Development Strategy until 2030, with the goal of upgrading the stock market by 2025. This is also the key task of the Ministry of Finance over the past time.

The representative of the State Securities Commission said that international rating organizations classify the stock market into four key groups: the developed market group with large capital and high openness; the emerging stock market group has the ability for foreign investors to access, high liquidity scale, and strict legal regulations; the marginal stock market group (Vietnam is in this ranking); the stock market group has not been ranked yet.

According to Ms. Pham Thi Thuy Linh, Vietnam currently meets 7/9 criteria. Currently, two criteria need to be improved including: foreign investors' pre-transaction deposit and ownership ratio of foreign investors.

“For the margin solution, we have discussed with international rating organizations to find a solution. The State Securities Commission has submitted to the Ministry of Finance a proposal to amend and supplement a number of documents, currently, institutional foreign investors are not required to deposit 100% cash” Linh said.

Regarding the foreign ownership rate, she said that the State Securities Commission has coordinated with the Ministry of Finance and the Ministry of Planning and Investment to review industries and announce information in English for investors to easily understand the ownership rate of businesses. At the same time, the Commission has proposed the Ministry of Planning and Investment to collaborate with other ministries and sectors to review industries and possibly expand the ownership rate of foreign investors in some non-essential industries.

In addition, the State Securities Commission will report to the Ministry of Finance to revise the regulations on information disclosure in English applicable to public companies and large-scale listed companies, and expect to apply to announcements in English for periodic information disclosure and large-scale listed organizations from January 1, 2025; for unusual information from January 1, 2026; for all public companies from January 1, 2028.

“The implementation has received high support from market members. We expect to achieve the goal of upgrading the market in 2025. This matter depends heavily on the customer rating review period and experience, we hope that securities companies will disseminate to encourage investors when they have a good experience” Ms. Linh said.

Regarding the use of non-voting depository receipt (NVDR) to remove barriers to upgrading the stock market, Mr. Tran Hoang Son, Director of Market Strategy of VPBankS Securities Joint Stock Company, said that this is the most effective solution at the present time.

The application of NVDR has been applied very successfully in Thailand. The application of non-voting depository certificates helps foreign investors who want to trade stocks in Vietnam do not need to have voting rights.

​According to Mr. Son, Thailand has resolved the immediate transaction needs of foreign investors. This certificate has helped increase 20% of the total transactions in the entire Thai market, which is an important factor helping Thailand upgrade to the emerging market. Similar to Vietnam, where the time is very short to deploy the upgrade the market, this certificate will be the most effective solution.

Mr. Hoang Son said that we are in a pivotal year for the upgrading of the market, the revision of legal framework will meet requirements of international organizations.

Besides, the change in trading infrastructure ensures openness. In the coming time, the new trading infrastructure will help investors trade faster, and many organizations may transact automatically.

On the new infrastructure, there will be many new products, shortening transaction time from T2.5 to T2. The new infrastructure will help investors benefit a lot in terms of trading products and increase market liquidity.

Mr. Son said that motivated by the developed information technology system, investors' transactions will be more transparent, and the sales and market share of the securities company will see growth.

Regarding the KRX system, the representative of the State Securities Commission said that the information disclosure system is deployed for securities companies and depository centers and departments to have a pilot session. The State Securities Commission is determined to put the system into successful pilot.