Solutions needed to develop a stable and transparent stock market

Fast and strong development

The stock market is considered an important medium- and long-term capital mobilization channel for the economy . According to the State Securities Commission (SSC), the value of capital mobilization by enterprises through the issuance of shares and corporate bonds (CBOs) in 2021 reached nearly VND 731,349 billion (of which, the value of capital mobilization through stock issuance reached nearly VND 95,698 billion, through the issuance of corporate bonds to the public reached nearly VND 29,766 billion, through the issuance of individual corporate bonds was VND 605,934 billion); in 2022, the value of capital mobilization through the issuance of shares and corporate bonds to the public is estimated at VND 116,684 billion.

In addition, the scale of the stock market is growing, by the end of April 2023, the market capitalization of the three stock exchanges HOSE, HNX and UPCoM is estimated at VND 5,416 trillion, equivalent to 60.89% of estimated GDP in 2022; the market has 758 stocks and fund certificates listed on the two Stock Exchanges (SGDCK) and 857 stocks registered for trading on UPCoM with a total listed value, registered for trading reaching VND 1,992 trillion, equivalent to 20.9% of estimated GDP in 2022; there are 449 listed bond codes with a listed value of more than VND 1,834 trillion, equivalent to 19.3% of estimated GDP in 2022.

Along with that, the continuously increasing number of investors has contributed to boosting market liquidity. The number of investor accounts by the end of April 2023 was over 7 million accounts, an increase of more than 1.5 times compared to the end of 2020 and exceeding 5% of the population, 3 years ahead of the target set by the Government in the Project on Restructuring the Securities and Insurance Markets to 2020, with a vision to 2025. Of which, the number of domestic investor accounts reached 7,016 million accounts, an increase of over 156% compared to the end of 2020 and the number of foreign investor accounts reached 43,465 accounts, an increase of 24% compared to the end of 2020.

However, with the sharp decline in the stock market, 2022 is considered a difficult year for most investors in the Vietnamese stock market when the market is unpredictable and influenced by many factors. In addition, the ups and downs of the indices are also different from the forecasts and expectations of most domestic and foreign analysts, as well as investors themselves. Therefore, in recent times, the management and supervision of the stock market has been increasingly focused on strengthening and perfecting in all areas of operation. Compliance supervision of the activities of the Vietnam Stock Exchange and its subsidiaries, the Vietnam Securities Depository and Clearing Corporation, and transaction supervision on the stock market are carried out in accordance with legal regulations. In addition, supervision of compliance with public company obligations (obligations to disclose information, corporate governance, and disclosure of information on the use of capital raised from the offering) is also regularly carried out. At the same time, the Ministry of Finance (SSC) proactively reviewed the compliance with public company obligations of a number of companies with unusual trading prices on the stock exchange. Strengthened the strict review of issuance by public companies and listed companies, especially in cases of rapid capital increase; implemented inspections of public company operations, organized audits according to approved plans; continued to review the 2022 Financial Report and the 1st Quarter 2023 Financial Report of public companies. Thereby, promptly detecting and handling violations of securities and stock market laws.

There are still many limitations

In addition to the above positive results, the Vietnamese stock market still has many limitations. It can be seen that the number of individual investors still accounts for the majority in the stock market, institutional investors account for a small proportion, leading to basically unstable transactions on the stock market, mainly following the psychology of individual investors. Many individual investors are not fully equipped with legal knowledge, awareness is still limited, despite having been informed, propagandized, warned many times, understanding the market, buying and selling based on rumors.

Besides, monitoring and inspection activities still face many difficulties because violations of the law in the market are increasingly sophisticated and complicated while monitoring and inspection resources are still limited.

Although there have been new products added to the stock market, they are still not diverse, mainly the basic stock market (listed/registered stocks for trading), derivative securities products are still limited.

In particular, the market is still in the development stage, so it is still greatly affected by psychological factors. The impact of false rumors, concerns about cash flow, inflationary pressure, and global economic and political instability has made investors cautious, affecting the stock market. The synchronization with the downward trend of the world stock market has led to a decline and fluctuations in the stock market from April 2022 to the first months of 2023.

According to many economic experts, the development of the stock market in the coming time depends largely on macroeconomic policies and economic prospects in the country as well as the world. In the context of inflation starting to decrease in some economies such as the US and EU, the roadmap for raising interest rates of some central banks, although continuing, tends to slow down, with smaller increases. These are positive signals for the Vietnamese economy in general and the stock market in particular. The Government's efforts in removing difficulties for the real estate market, the corporate bond market, and promoting public investment are also expected to bring positive impacts to the Vietnamese economy, stimulating domestic production and business activities.

Since the beginning of the year, the State Bank of Vietnam (SBV) has issued three decisions to reduce the operating interest rate. Accordingly, the deposit and lending interest rates of many commercial banks have continued to decrease in the last few weeks of April and early May 2023. In addition, recently issued support policies such as Circular 02/2023/TT-NHNN of the SBV guiding credit institutions to restructure debt repayment terms and maintain debt groups to support customers in difficulty, Decree 12/2023/ND-CP of the Government on extending the deadline for payment of value added tax and corporate income tax, Circular 03/2023/TT-NHNN of the SBV allowing credit institutions to buy back unlisted corporate bonds, are practical solutions to remove difficulties for businesses and people.

In addition, the pandemic continues to be well controlled, the fundamental macroeconomic factors and major balances are basically maintained and under control, economic activities, domestic consumption and international tourism are restored. This is a factor that positively affects liquidity on the stock market in the third and fourth quarters of 2023.

5 solutions to promote healthy and sustainable market development

The Vietnamese economy in general and the stock market in particular, in 2023, will still face many difficulties and challenges. To ensure the continuous, smooth, stable and transparent operation of the stock market, while promoting the market to develop in a sustainable, safe and transparent manner, protecting the rights and legitimate interests of investors, it is necessary to continue to implement synchronous solutions.

Firstly, regarding the completion of the legal and institutional framework, the State Securities Commission (Ministry of Finance) is reviewing all regulations in the Securities Law and guiding documents to immediately overcome shortcomings and difficulties, including clearly defining the scope of operations and service provision of securities companies, supplementing regulations to better manage investors, strengthening sanctions for violations to protect the legitimate rights and interests of investors... ensuring the healthy, transparent and sustainable development of the stock market.

Second, regarding market organization activities, speed up the progress of putting into operation the KRX information technology system to facilitate the deployment of new products and services on the stock market and ensure the market operates smoothly, continuously, safely and effectively. At the same time, the State Securities Commission (Ministry of Finance) is directing relevant parties to prepare a trading platform for individual corporate bonds to contribute to increasing transparency in the secondary market; promote the restructuring of the stock market, improve the competitiveness and quality of market intermediary institutions through continuing to restructure securities companies and fund management companies according to the project approved by the Prime Minister.

Third, regarding supervision and inspection work on the stock market, enhancing the role and responsibility of the supervision lines, in which promoting the role of the first supervision line, which is securities companies, will be focused on to ensure a transparent and effective market operation.

Accordingly, the State Securities Commission (Ministry of Finance) will strengthen supervision of securities companies to properly and fully perform their role as frontline supervisors as prescribed in the Securities Law 2019 and guiding documents to promptly prevent and detect violations in the market. In addition, it will promote the improvement of human resources for inspection and supervision; complete and put into use the upgraded transaction monitoring system with analysis, warning and statistical features.

In addition, continue to closely monitor developments in the domestic and international stock markets; coordinate with relevant agencies and organizations to strengthen the supervision of trading activities on the stock market, provide early warnings to investors about risks (if any) of the stock market; continue to strengthen inspection and examination work, and strictly handle violations on the stock market to increase deterrence, strengthen discipline in the market, and aim for transparent and sustainable development of the stock market.

Fourth, regarding communication work, strengthen the provision of complete, accurate and timely information to the investing public, helping businesses and investors quickly and fully access official information sources, limiting the psychological impact of rumors and fake news in the market.

Fifth, actively coordinate with international organizations to implement solutions to soon upgrade Vietnam's stock market according to the set roadmap to attract foreign investors to the Vietnamese market./.

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