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| Illustration photo (Photo: HNX) |
Since September 2018, Vietnam has been on the Waiting List for consideration for emerging market classification by FTSE Russell (an independent company that creates indices for global financial markets; owned by the London Stock Exchange). However, over the years, a number of important criteria have not been fully met, hindering the upgrade process. One of those criteria is “Delivery Cycle (DvP)”, which is currently rated as “Restricted” by FTSE Russell. The Vietnamese stock market is conducting pre-trade checks to ensure that investors have sufficient funds in their accounts before trading, in order to prevent failed transactions. However, this does not meet the requirements for international standard transaction risk management.
On the other hand, FTSE Russell also commented that the account opening process for foreign investors in Vietnam still has many complicated procedures, making the process longer than other markets. To promote the upgrade, Vietnam needs to further improve this process, creating favorable conditions for international investors to access the market.
One of the highlights of FTSE Russell’s report is the recognition of the improvement in the Non-Prefunding payment model, which has been adjusted and applied through Circular 68/2024/TT-BTC, issued on September 18, 2024 by the Ministry of Finance . This Circular removes the requirement for foreign institutional investors to have sufficient funds before making a purchase transaction, an important change to reduce barriers for foreign investors to participate in the Vietnamese stock market.
In addition, Circular 68 also updates many new regulations related to securities trading, payment and clearing, operations of securities companies, as well as information disclosure requirements. These changes not only help the Vietnamese stock market move closer to international standards but also help improve liquidity, creating favorable conditions for cross-border transactions.
FTSE Russell particularly appreciates the close coordination between Vietnamese regulators, including the State Securities Commission (SSC) and market participants, in the implementation of this new settlement model. This is considered an important step in improving the missing criteria, creating a foundation for an upgrade in the near future.
The FTSE Russell report also highlighted the Vietnamese Government’s determination to upgrade its stock market to emerging market status by 2025. The Prime Minister specifically committed that Vietnam would remove barriers to meet FTSE’s criteria, including simplifying the account opening process for foreign investors and facilitating securities transactions.
Since February 2023, the Prime Minister has reaffirmed this commitment and requested management agencies to promptly complete legal regulations, amend relevant procedures and remove unnecessary administrative barriers. The Government is also reviewing foreign ownership limits in a number of important business sectors, aiming to attract more international investment flows into the Vietnamese market.
Despite the measures being implemented, FTSE Russell noted that to achieve the target of upgrading by 2025, Vietnam needs to continue to maintain the pace of reform and improve the business environment. Detailed regulations on payment and clearing, especially those related to the Vietnam Securities Depository and Clearing Corporation (VSDC), should be issued promptly and clearly. This will help ensure the transparency and enforceability of the new regulations.
FTSE Russell also recommends that Vietnam hold further dialogues with the international investment community to ensure that the new regulations are well understood and aligned with investors’ needs. This will not only help increase market confidence but also promote the upgrade process in the near future.
According to SSI Research, if Vietnam is upgraded to a secondary emerging market, the capital flow from ETFs into Vietnam could reach up to 1.7 billion USD, not to mention the capital flow from active investment funds. FTSE Russell estimates that the total assets under management of active funds are 5 times larger than those of ETFs, which opens up a great opportunity for the Vietnamese stock market to attract investment capital.
However, FTSE Russell also stressed that changes need to be made quickly and decisively, especially in finalizing legal regulations and implementing the roadmap for implementing the Non-Prefunding model.
Vietnam is at a critical stage in its stock market reform, with the goal of being upgraded to secondary emerging market status by 2025. Recent efforts, particularly the implementation of the Non-Prefunding settlement model and related regulations, have been highly appreciated by FTSE Russell. However, to achieve this goal, Vietnam needs to continue to promote reforms, simplify administrative procedures and improve transparency in the stock market.
FTSE Russell is expected to update Vietnam's situation in the mid-term review in March 2025, marking an important step in the upgrade journey of Vietnam's stock market./.
Source: https://dangcongsan.vn/kinh-te/ftse-russell-tiep-tuc-giu-viet-nam-trong-danh-sach-xem-xet-nang-hang-680125.html
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