Is it difficult for the stock market to reach 100% of GDP?

Although the number of securities trading accounts in Vietnam has exceeded 11 million – surpassing the 2030 target – the market capitalization is still a considerable distance from this year's target of 100% of GDP, reaching only about $340 billion.

The average daily trading value of shares on the Vietnamese stock market in the first nine months of the year reached approximately US$1.16 billion, placing it among the most liquid markets in the region. - Photo: QUANG DINH

According to the Stock Market Development Strategy until 2030, the market capitalization of stocks needs to reach 100% of GDP by the end of 2025.

With the stock market capitalization currently only reaching about 70-80% of GDP, can the market reach its target on schedule? What should market regulators do to promote the growth of Vietnam's stock market capitalization?

Large businesses should be encouraged to go public.

Speaking to Tuoi Tre newspaper, Mr. Do Bao Ngoc, Deputy General Director of Kien Thiet Securities Company, said that setting a target for stock market capitalization is extremely necessary, as it is a measure reflecting the level of development of the financial market.

The higher the market's share of GDP and the larger its market capitalization, the more developed and widespread the national financial system becomes. According to Mr. Ngoc, achieving a market capitalization equivalent to 100% of GDP requires implementing many synchronized solutions, with policies encouraging listing playing a crucial role.

In reality, according to Mr. Ngoc, there are still many large businesses, especially state-owned enterprises and leading private corporations, that have not yet gone public. These are "good stocks" that, if listed, would help expand their market capitalization rapidly.

According to Mr. Ngoc, the role of regulatory agencies in creating incentives for businesses to list on the stock exchange is important, but the internal growth of businesses is the biggest driving force for the market.

Meanwhile, Huynh Anh Huy, Director of Industry Analysis at Kafi Securities, believes that achieving a market capitalization of 100% of GDP is only a matter of time. However, before reaching that goal, the stock market still has many steps to take in terms of innovation and scaling up.

During this process, Vietnam has achieved several important milestones, most recently meeting the FTSE market upgrade criteria, opening up opportunities to attract capital inflows and raise market valuation levels.

According to Mr. Huy, in the roadmap for developing the stock market, the merger of the three exchanges, HOSE, HNX, and UPCOM, is also underway. This will help businesses achieve uniformity in reporting standards and transparency, as well as create conditions for new investors to easily participate in the market.

Furthermore, the regulatory body is also promoting the implementation of a mechanism that allows foreign brokers to directly place orders on the Vietnamese stock market. This is a necessary step that needs to be accelerated to attract capital into the Vietnamese market before the official upgrade.

We need to improve the quality of securities and reduce the number of "junk" stocks.

Despite the promising outlook, Mr. Ngoc acknowledged that the market still faces many obstacles. The privatization process of state-owned enterprises remains slow. The investor structure is unbalanced, with the majority of transactions coming from individual investors. This will make the market prone to "volatile" sessions due to short-term, speculative sentiment.

Furthermore, the quality of goods listed on the exchange raises many issues, as there are still many "junk" stocks. Listing weak companies not only fails to create value but also erodes investor confidence. Therefore, quality must be prioritized, coupled with stricter oversight mechanisms.

"For sustainable development, it is necessary to simultaneously improve the quality of listed companies and increase the proportion of institutional investors. The market will only truly attract long-term capital flows when listed stocks meet standards of transparency, sound finance, and efficient operation," Mr. Ngoc said.

Furthermore, according to financial expert Tran Trong Duc, General Director of Virtus Prosperity, the free float ratio (shares freely traded on the market) of many large enterprises is still low, failing to attract foreign investors. "When holding only a few percent of shares, international funds have almost no say in the company. This reduces investment appeal," Mr. Duc analyzed.

To ensure liquidity and transparency in governance, Mr. Duc suggested that the average free float ratio should be between 30% and 50%. Encouraging large listed companies to increase their free float ratio will also enhance their attractiveness to institutional investors, positively impacting and increasing the overall market capitalization.

Furthermore, according to Mr. Duc, Vietnam is lacking internationally significant IPOs. "Many 'big players' are still not listed, while this is precisely the group of businesses with the potential to create breakthroughs for the market," Mr. Duc said, adding that the sale of shares to foreign partners or international funds is a key factor in revaluing the entire market.

Meanwhile, Mr. Huy believes that what investors, especially large foreign organizations, are interested in is the amount of "stock" on the market. Many corporations, state-owned enterprises, and large businesses have yet to go public and list on the stock exchange. "The wave of IPOs from major securities companies like TCBS, TPBS, and VPS is the first 'shot' to reactivate the listing trend of Vietnamese businesses, contributing to a strong boost in market size," Mr. Huy said.

Data: SSC - Graphics: TUAN ANH

Encourage investment through funds.

At a recent event in Hanoi , Mr. Bui Hoang Hai, Vice Chairman of the Securities Commission, emphasized that FTSE Russell's upgrade decision marks the beginning of a new chapter, a start to stronger, more standardized, and more disciplined policies and reforms. Accordingly, the focus will be on perfecting institutions and laws, and improving the business environment towards transparency, convenience, and equality for all entities...

Continue to remove obstacles to increase market openness, in line with international practices such as: implementing a central counterparty clearing mechanism (CCP) for the underlying securities market (stocks, fund certificates, guaranteed warrants) by early 2027; increasing information transparency and expanding the maximum foreign ownership ratio in various sectors; researching and implementing an over-the-counter (OTA) trading account mechanism...

Furthermore, Mr. Hai affirmed that the market will diversify its product base, develop modern financial products and services to expand investment opportunities and manage risks more effectively: promoting public offerings of shares associated with listing and trading registration on the stock market; attracting large-scale enterprises with sound financial situations and corporate governance to list...

Research and develop new products such as infrastructure development bonds to serve the country's infrastructure development; develop diverse bond products such as green bonds, sustainable bonds, and derivative securities products such as options contracts, new futures contracts... in order to attract capital from foreign markets into high-quality domestic enterprises...

Develop institutional investors through the development and diversification of securities investment funds. Encourage individual investors to participate in the market through professional investment institutions (securities investment funds) to minimize risks and improve investment efficiency.

Vietnam's stock market liquidity is among the highest in the region.

According to the Securities Commission, as of September 30th, the stock market capitalization reached 9.4 million billion VND (equivalent to 81.8% of the estimated GDP in 2024); the average trading value over the first nine months reached nearly 29,100 billion VND per session (approximately 1.16 billion USD per session).

The Vietnamese stock market is among the most liquid markets in ASEAN, nearly equivalent to the liquidity of the Thai market (approximately US$1.3 billion/session), Singapore (approximately US$1.4 billion/session), and higher than the markets of the Philippines (US$116.3 million/session), Malaysia (approximately US$564 million/session), Indonesia (US$924.7 million/session), etc.

However, according to experts, the imbalance between individual and institutional investors is a limitation that needs to be overcome. In reality, the majority of individual investors in Vietnam still lack investment knowledge and confidence in funds. To improve this issue, experts suggest allowing the expansion of fund management companies instead of restricting them, while also developing new financial products...

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BINH KHANH

Source: https://tuoitre.vn/chung-khoan-kho-ve-dich-100-gdp-20251106231411387.htm