Waiting for foreign capital to flow into Vietnam

The Government is determined to upgrade the stock market to develop in the direction of digital economy , green economy, and circular economy, aiming to become an emerging market by 2025, attracting about 25 billion USD in foreign indirect investment each year.

In the session on February 28, VN-Index increased sharply, surpassing the peak of 2023 - Photo: QUANG DINH

Prime Minister Pham Minh Chinh affirmed this when chairing the Conference on deploying the task of developing the stock market in 2024 on February 28 with the participation of many diplomatic agencies, international organizations and a large number of domestic and foreign enterprises and investors.

Focus on reviewing and amending inappropriate regulations

Expressing great interest in the stock market, Prime Minister Pham Minh Chinh affirmed: "At 12:40 every day, I always follow the news to see how the market is today to have timely policy responses. We also always think that the Government must protect the legitimate and legal rights and interests of investors and entities related to the stock market". With the results achieved by the market over the past 25 years, the head of the Government affirmed that 2024 must be the year of acceleration and 2025 must be the year of breakthrough. In particular, the goal by 2025 is that Vietnam will become an emerging stock market, contributing to attracting about 25 billion USD in foreign indirect investment each year, equivalent to direct investment. Prime Minister Pham Minh Chinh also affirmed that the Government is determined to upgrade the market and focus on developing according to the trend of digital transformation, green economy, circular economy, sharing economy, knowledge economy; fast and sustainable development; perform the functions of providing capital to the market; strongly develop the infrastructure and ecosystem of the stock market. To achieve this goal, the Prime Minister assigned the Ministry of Finance and the State Securities Commission, together with relevant ministries and branches, to focus on reviewing and amending inappropriate regulations related to regulations on information transparency, rights and responsibilities of management entities and market participants; upgrading and building infrastructure in a modern direction, applying digital technology... Improve the effectiveness of supervision, inspection and examination to effectively prevent and combat violations. Strictly handle cases and violations, ensure the sustainable development of the market and fair, public and transparent operations. Expand promotion, advertising, provision of official information, management and supervision of securities practitioners... To upgrade the market, the head of the Government requested urgent implementation of necessary measures, removing difficulties with the spirit of "what is said is done, what is committed is done". Accordingly, it is necessary to amend and supplement regulations and technical issues that are still stuck, improve market transparency, and remove barriers to facilitate foreign investors' access to the market. The Ministry of Planning and Investment is required to urgently review and fully publicize the maximum foreign ownership ratio of conditional business lines or restricted access for foreign investors; regularly update the bilingual information page. The State Bank reviews to simplify procedures and documents, shorten the process of opening indirect investment capital accounts for foreign investors; research clearing and settlement tools in accordance with market rules...

VN-Index surpassed the peak set in 2023 in the session on February 28, 2024 - Photo: QUANG DINH

Need to open soon for foreign investors

Speaking at the conference, Mr. Ketut Ariadi Kusuma - Head of Finance, Competitiveness and Innovation Group of the World Bank (WB) in Vietnam - assessed that Vietnam's aspiration to upgrade its stock market to an emerging market is a strategic step, in line with its larger ambition of transforming into an upper-middle-income country by 2035 and a high-income country by 2045. Achieving this goal requires an average annual real growth rate per capita of about 5.95% over the next two decades. To date, the stock market has reached a capitalization of about 247 billion USD, accounting for 57% of GDP in 2023 and reaching a record high of 93% of GDP in 2021, showing the potential for capital mobilization for the business sector. The World Bank estimates that upgrading the market could bring in up to $25 billion in new investment from international investors by 2030. Therefore, Mr. Ketut Ariadi Kusuma recommends considering resolving issues related to foreign ownership limits (FOL) and continuing to equitize large state-owned enterprises. Along with that, there needs to be a healthy investment environment to absorb the natural growth of global investment in emerging markets, estimated at 7%/year; associated with developing the domestic investor base, diversifying social insurance fund investments.

"Reforms in the insurance and investment fund sectors, if properly implemented, could generate $28 billion. Thus, the estimated potential for new capital mobilization for the capital market is $78 billion. The growing investment demand must be accompanied by high-quality financial products, especially stocks and corporate bonds. This emphasizes the importance of a healthy ecosystem, including strict supervision, clear information disclosure and reliable credit ratings," said the WB expert. Mr. Johan Nyvene, Director of Ho Chi Minh City Securities Corporation, also recommended expanding the ownership ratio of foreign investors in Vietnamese companies without restrictions. Listed enterprises can proactively propose to loosen foreign ownership limits. In particular, it is necessary to adjust or remove pre-transaction margin requirements, especially for foreign institutional investors. In addition, it is necessary to improve liquidity, transparency and corporate governance standards, develop infrastructure and accompanying financial services.

Prime Minister delivers concluding remarks at the conference - Photo: NAM ANH

Increase information transparency, increase product quality

Also at the conference, a report from the Securities Commission showed that the business situation of listed enterprises is still facing many difficulties, with revenue and profits decreasing in 2023. According to this agency, violations by enterprises are occurring more frequently with increasingly sophisticated and complicated behaviors. In particular, some cases with signs of violating criminal law such as the case of manipulating stock prices of FLC, Louis Holding, APEC... Ms. Nguyen Thi Mai Thanh, Chairwoman of the Board of Directors of Refrigeration Electrical Engineering Corporation (REE), said that listed companies are "goods" on the market, so they must be good and there must be no fake goods. Therefore, Ms. Thanh recommended that the Government continue to create a more open and transparent legal environment for business, possibly moving towards a one-stop service, reducing the request-grant mechanism, avoiding current obstacles such as slow administrative procedures and low efficiency. According to Mr. Luu Trung Thai - Chairman of the Board of Directors of Military Bank (MB), promoting in-depth market development and increasing businesses' access to capital is very important. Therefore, the key solution is to classify and independently rank listed businesses according to industry criteria and operational efficiency to increase brand strength and market share in the industry, information transparency, associated with increasing the quality of goods on the market, and perfecting the Clearing House (CCP) to help upgrade the market. Mr. Truong Gia Binh, Chairman of FPT, pointed out that the key to upgrading the market is to focus on technology, data development, and ensuring transparency of listed businesses. Promoting green capital flows, bonds, and green finance to create resources for sustainable economic development. Applying artificial intelligence (AI) to detect unusual transactions, errors, and fraud from financial reports, protecting state assets, businesses, and people. According to Ms. Nguyen Thi Bich Ngoc - Deputy Minister of Planning and Investment , it is necessary to increase quality goods to mobilize more resources to create new products, focusing on green finance and sustainable development. "It is necessary to accelerate the equitization of state-owned enterprises and allow FDI enterprises that meet the conditions and regulations to be listed on the stock exchange. It is necessary to distinguish the conditions on the ownership ratio of foreign investors in listed enterprises so that there can be some more open conditions," Ms. Ngoc proposed.

Source: SSC - Data: BINH KHANH - Graphics: TUAN ANH

Up 17 points, VN-Index just surpassed the peak of 2023

In the trading session on February 28, when the Prime Minister chaired a conference to discuss solutions to promote the early upgrading of the Vietnamese stock market, the VN-Index increased by more than 17 points, closing at 1,254.55 points - the highest point since September 2022. The total trading value of the market, including all three floors, reached VND 25,374 billion, down 1.4% compared to the previous session but still 20.4% higher than the average of the last 20 sessions. Statistics show that up to 12/18 sectors increased points, with 309 stocks increasing on HoSE, compared to 180 stocks decreasing. In the VN30 group alone, green dominated with 25/30 stocks increasing in price. Of which, banking and oil and gas led the market's growth today. Foreign investors also disbursed more actively with a net buying value of more than VND 220 billion.

Associate Professor, Dr. Tran Viet Dung (Director of the Institute of Banking Science Research, Banking Academy):

Timely handling of businesses that increase virtual capital and use it for the wrong purposes

Vietnam has been on the watch list of FTSE Russell since September 2018, with the potential to be upgraded to a secondary emerging market. When upgraded, the stock market will increase its attractiveness, increasing the ability of businesses to access foreign capital with an estimated 3.5 - 4 billion USD to buy new Vietnamese stocks (BSC, 2023). However, if the stock market is to be upgraded, information transparency is an essential requirement and the role of market inspection and supervision is very important. It is necessary to strengthen inspection and supervision of capital mobilization activities and the use of mobilized capital on the stock market to promptly detect and handle cases of virtual capital increase and misuse of capital. In addition, it is necessary to classify stocks, improve listing conditions and conditions for maintaining listing for stocks in each table, and supplement criteria on corporate governance... Although sanctions are available, in order to detect information fraud and enforce them according to the provisions of the law, it is necessary to issue detailed and specific guidance documents, ensuring that the sanctioning process is quick, simple, and sufficiently deterrent... Mr. Tran Thang Long (Analysis Director, BIDV Securities Joint Stock Company):

Must increase quality goods for the market

It can be said that the Vietnamese stock market is attracting the attention of many foreign investors. However, there are not many options for foreign investors to disburse their capital. In recent years, the number of listed enterprises is not much, especially large-scale and well-organized "newcomers". Therefore, in addition to removing bottlenecks in "room" and margin, there must be solutions to promote the development of the stock market to take on the true role of a long-term capital market for enterprises. Accordingly, it is necessary to increase the number of newly listed enterprises on the stock exchange, especially large-scale enterprises, well-developed, and diversified industries listed on the stock exchange. Most of the stocks in the VN30 or VN100 basket are in the financial sector, not fully representing the economy. Therefore, it is necessary to strengthen enterprises in the production and consumption sectors... Mr. Dominic Scriven (Chairman of Dragon Capital Vietnam Fund):

Violations must be severely punished.

To prepare for the upgrading of Vietnam's stock market, we need to soon establish a central clearing partner (CCP), and at the same time, soon research and select a pilot issuance of non-voting depository receipts (NVDRs) to increase the availability of shares that have reached the foreign ownership limit. The development of the capital market depends heavily on investor confidence. This can only be built through improving market transparency and fairness, applying appropriate sanctions for violations and implementing investor protection mechanisms, especially when the number of individual investors accounts for 87% of the total number of investors in the market. In addition, there should be policies and solutions to encourage pension funds, insurance companies and other types of institutional and professional investors to participate in the stock market. Mr. Bui Van Huy (Director of Ho Chi Minh City Branch of DSC Securities):

Need to amend regulations on foreign investors' deposits

If upgraded, Vietnam's stock market will attract more foreign investment capital. If we consider the FTSE Emerging Markets Index alone, the scale of passive capital inflows of 1 billion USD can flow into Vietnam's stock market. Upgrading the stock market also helps expand the ability to mobilize secondary capital such as the stock and bond markets. However, the roadmap for upgrading to emerging market is based on FTSE Russell's classification criteria. The first necessary condition is a new trading system, helping to improve transaction quality, handle problems such as order congestion, payment time and liquidity risk. In addition, some criteria are facing many barriers. That is the solution to the problem of requiring 100% deposit of foreign investors before trading is still open, unifying regulations on foreign ownership ratio in enterprises, and limited information disclosure in English...

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