Upgrading Vietnam's stock market: Opening up new opportunities

When the market operates according to international standards on payment, custody, clearing and information disclosure, individual investors will benefit from a safer and more reliable investment environment. (Photo: Minh An)

Foreign capital needs transparency for sustainable development

The recognition of the Vietnamese market as an “emerging market” will help many global investment funds, especially passive funds (ETFs) or index funds, consider increasing their weighting for Vietnamese stocks. Foreign capital can flow in on a large scale, increasing market liquidity and motivating listed companies to raise long-term capital, thereby promoting production, expanding investment and economic development.

At the same time, upgrading requires transparency, information disclosure, and better governance. When the market operates according to international standards on payment, custody, clearing, and information disclosure, domestic individual investors will also benefit from a safer and more reliable investment environment. This is also an opportunity for businesses to adjust their governance activities, disclose transparency, and move towards sustainable development and enhance their reputation in the international capital market.

Furthermore, the upgrade creates leverage for the development of the financial system, from securities companies, investment funds, depository services, payments, etc. to trading infrastructure. The completion of this ecosystem helps the Vietnamese stock market become more professional and attractive to both domestic and international investors.

Ms. Tran Thi Thanh An said: Transparency becomes a "common language" that helps businesses approach and maintain trust from the global market. (Photo: Thanh Minh)

Ms. Tran Thi Thanh An, Head of the Ho Chi Minh City Branch of the Securities Research and Training Center, said: In the context of institutional investors playing an increasingly important role, transparency has become a "common language" to help businesses access and maintain trust from the global market. Information transparency, corporate governance according to OECD standards and ESG practices are three key groups of solutions that public companies need to prioritize improving and implementing to meet the expectations of international capital flows during the market upgrading period.

Although it has met the criteria for upgrading, the new environment requires Vietnam to maintain international standards or else the risk of “falling down the rankings” still exists. This requires a monitoring system, legal regulations, investor protection mechanisms, handling of violations, and strict and transparent information disclosure.

Another major challenge is that the trading, payment and custody infrastructure needs to be modernized to ensure stable operations when the volume of transactions and foreign capital flows increase sharply. If this system cannot respond in time, there may be payment delays, technical risks, affecting investor confidence.

In addition, the massive inflow of foreign capital can lead to a sharp increase in stock prices, inflating prices beyond their real value, which can create a “bubble” and cause strong fluctuations in the market. Individual investors who follow the “herd effect” are likely to suffer losses. Therefore, it is necessary to warn and raise awareness of long-term, sustainable investment rather than speculation.

Finally, listed enterprises need to make efforts to improve governance and information transparency; otherwise, it will be difficult to compete with enterprises in other emerging markets; and at the same time, it will be difficult to access long-term foreign capital flows.

Long-term, coordinated action

To turn “upgrading” into a solid foundation for development, there needs to be close coordination between many parties, namely management agencies need to perfect the legal system, transparent regulations, strict supervision, investor protection, and handling of violations to build a stable and reliable market. Market infrastructure establishes and operates payment, depository, clearing, and trading systems according to international standards; ensuring smooth and transparent operations when trading volume increases sharply.

At the same time, listed enterprises need to improve governance standards, transparently disclose information, and comply with regulations; and improve management quality and financial transparency to become attractive to foreign investors. Along with that, investors need to change their thinking: from short-term speculation to long-term investment, carefully analyze enterprises, clearly understand risks, and avoid being swept away by the "foreign capital" wave and losing vigilance.

Upgrading Vietnam’s stock market is not just a technical or formal milestone, it is a real opportunity to restructure the capital market, effectively mobilize resources, develop enterprises, and deeply integrate with the global financial system. However, to take advantage of this opportunity, Vietnam needs to act synchronously, persistently, transparently and responsibly.

If done well, the stock market will become a strong financial framework, promoting economic and business development and opening the door to investment and sustainable growth for the whole society.

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