Filling the gaps to upgrade the Vietnamese stock market.

In order to find effective practical solutions, promote more transparent and efficient information disclosure by market participants, and support the upgrading of the Vietnamese stock market from a frontier market to an emerging market, the workshop "Upgrading the Stock Market and Information Transparency of Listed Companies" was held on October 10th to assess the difficulties and obstacles encountered in the past.

Speaking at the conference, Mr. Pham Hong Son, Vice Chairman of the State Securities Commission (SSC), said that the SSC considers upgrading the stock market from a frontier market to an emerging market as a key objective.

Currently, the Vietnamese stock market is a member of the World Federation of Stock Exchanges (WFE), and the market's legal framework, including decrees, is moving towards meeting international standards.

“First, there is the requirement that listed companies disclose information in English. Currently, our regulations are only at the level of encouragement; making it mandatory would put great pressure on businesses. This seems like a simple issue, but only a few large companies have met the requirement. Therefore, if it is made into a regulation, enforcement of penalties will be difficult. Every step needs a suitable approach,” said the Vice Chairman of the State Securities Commission.

He also gave specific examples such as: According to FTSE Russell and MSCI, foreign investors currently do not know the specific foreign ownership ratio of a company, making it difficult to make investment decisions; it is predicted that more than $10 billion will flow into Vietnam when it is upgraded, but not for all markets, as foreign investors will choose good companies. However, if we want to choose good companies, will Vietnam expand the foreign ownership limit further?

Mr. Pham Hong Son - Vice Chairman of the State Securities Commission.

From this, it can be seen that upgrading, while seemingly a major issue, actually involves many specific problems. Essentially, Mr. Son recognizes that the scale of the capital market and market transparency to ensure upgrade criteria still present many challenges regarding integrity and risk resilience, while for the Stock Exchange, it's about ensuring smooth trading.

“We have reported this to the Ministry of Finance and the Prime Minister to find solutions. Through discussions with foreign investors, I see that they have high expectations for the Vietnamese stock market. Accordingly, the stock market must have a better legal framework, information disclosure must be more transparent, safer, and more sustainable. Because the fundamental principle is that the stock market must be transparent and protect investors,” Mr. Son affirmed.

Regarding the upgrade issue, Dr. Can Van Luc – an economic expert – believes that the stock market has two upgrade levels: FTSE and MSCI.

“I liken level 1 to the Sea Games, and level 2 to reaching the Asian level. I believe we need to face even greater pressure for reform, especially regarding legal regulations related to openness and transparency,” said Dr. Can Van Luc.

Vietnam currently lacks this element, while it is a solid foundation for the development of the stock market. Therefore, Vietnam needs to create pressure for governance, supervision, and improve governance standards, said Dr. Can Van Luc. He added that the market "size" is growing larger, sometimes even reaching 100-120% of GDP, so listed companies need different governance methods.

Mr. Luc also emphasized that upgrading the stock market is linked to the establishment of international financial centers in Ho Chi Minh City and Da Nang. With the current FTSE ranking, Vietnam lacks two important criteria: the requirement for pre-transaction margin deposits; leading to a lack of criteria for errors and risks in settlement. According to surveys, in the case of no margin deposit, the percentage of investors worldwide who fail to settle is only 2%, equivalent to a loss of $3 billion USD per year.

Accordingly, Mr. Luc also proposed three risk prevention measures: First, Vietnam needs to decisively upgrade its information technology system to avoid errors and mistakes. Second, control investor behavior by increasing penalties, imposing fines of $1,000-$5,000, or calculating fines based on a percentage of the total amount.

Dr. Can Van Luc – Economic expert.

Finally, increasing the authority of securities companies to assess risks and make independent decisions, securities companies are allowed to decide whether or not investors need to deposit margin. Regarding risk management mechanisms, securities companies are allowed to seize assets and securities, and liquidate securities in cases where investors are unable to pay.

Regarding MSCI's criteria for market upgrade, the stock market currently lacks nine criteria and needs to meet them, including: foreign ownership limits; remaining foreign ownership "room"; equal rights for foreign investment; degree of liberalization of the foreign exchange market; information flow; clearing and settlement; off-exchange transferability; securities lending; and short selling.

"Regarding the issue of foreign investor ownership, we need to consult and review the areas that need and do not need control, and we need to review Decision 155. In addition, we need to pay more attention to the freedom of capital flow and foreign exchange transactions, as this is an extremely important factor for the international financial market," Mr. Luc emphasized.

There is a need for greater liberalization of capital flows and foreign exchange transactions, increasing the attractiveness of the Vietnamese dong, and making it more freely convertible both domestically and internationally. Finally, the expert hopes that the State Securities Commission will develop a plan to "fill" the remaining gaps and provide a more specific proposal .

Source: https://www.nguoiduatin.vn/lap-lai-nhung-khoang-trong-de-nang-hang-thi-truong-chung-khoan-viet-a630382.html