The 2024 Stock Market Development Conference is being urgently prepared, expected to have the full participation of all parties, and is expected to help find solutions for the upgrading goal set for many years.
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| The gong-beating ceremony to open trading at the beginning of the Year of the Dragon was held at HoSE on the morning of February 19. Photo: Le Toan |
Thorough from the beginning of the year
At the gong-beating ceremony to open the first trading session of the Year of the Dragon early last week, the State Securities Commission said that it is urgently preparing to organize the 2024 Stock Market Development Conference. In addition to the participation and direction of Government leaders, the Conference also had the participation and sharing of opinions from representatives of ministries, branches, international financial institutions, listed enterprises and market members.
A conference with the full participation of all parties is necessary for the goal of upgrading the stock market, which Vietnam has pursued for many years but has not achieved. FTSE (a major organization in stock market ratings) has put Vietnam on the watch list since September 2018 and remains on the waiting list for consideration of upgrading to secondary emerging market in 2024. Meanwhile, for MSCI - a market rating organization with more stringent and tough criteria, Vietnam has not yet been included in the list for consideration of upgrading.
The capital upgrade target has been clearly stated in Resolution No. 86/NQ-CP dated July 11, 2022 of the Government and included in the Stock Market Development Strategy to 2030. Most recently, in Directive No. 06/CT-TTg dated February 15, 2024 on urging the implementation of key tasks after the 2024 Lunar New Year holiday, the Ministry of Finance was assigned to preside over and coordinate with the State Bank and the Ministry of Planning and Investment to promptly resolve problems in the assigned areas to meet the criteria for upgrading the market from a frontier market to an emerging market.
From the directives in the early days of spring, solutions for the upgrading target have been outlined for the new year. The market upgrade depends on the objective assessment of international rating organizations through the practical experience of foreign investors. The presence of international financial institutions at the above conference to share their wishes and opinions is also aimed at meeting the upgrading criteria, and furthermore, the goal of connecting foreign indirect investment flows.
Previously, positive steps in 2023 in listening to opinions from international financial institutions were noted. In the most recent semi-annual market classification report published in September, FTSE highly appreciated, even gave quite positive comments about a “fresh energy” in the effort to find a solution to upgrade.
Need cooperation of all parties
According to analysts from BIDV Securities Company (BSC), FTSE is evaluating two limited criteria including “Delivery Cycle (DvP)” and “Payment - costs related to failed transactions”. Since checking the availability of funds before making a transaction to ensure safety is a common practice in Vietnam, the market will not have failed transactions. Therefore, the criterion “Payment - costs related to failed transactions” is not evaluated.
Completing the transition to the new DvP payment mechanism based on the central clearing mechanism CCP and the KRX system will be a fundamental solution for FTSE to consider upgrading Vietnam's market to the secondary emerging market group as soon as possible. The State Securities Commission is looking for a solution to remove the pre-funding requirement in addition to putting the KRX trading system into operation soon.
Regarding the issue of deposit, the application of the central clearing counterparty model CCP with the approval of the State Bank, in which the depository bank must be a clearing member, will be the optimal solution to handle the pre-funding problem. The role of the State Bank is very important in implementing CCP, as well as the level of flexibility in operating exchange rate policy.
In fact, the above model has been stipulated in Decree No. 155/2020/ND-CP with the expected implementation orientation of 3 years from the effective date of the Decree. Not being able to complete before the deadline, the above Decree is being amended to extend the time from 3 years to 5 years.
As for the foreign ownership ratio criteria, it will be necessary to change regulations for each industry and list of restricted market access for foreign investors. Foreign ownership ratios are currently regulated in the Investment Law and Securities Law.
In addition, analysts from BSC also emphasized the research and pilot application of non-voting depository receipts (NVDR) - a product that the Thai stock market has implemented quite successfully. This also requires a mechanism in accordance with the provisions of the Enterprise Law.
The conference, attended by representatives of the above-mentioned ministries and sectors, is expected to resolve issues under the jurisdiction of many relevant agencies. In addition, the upgrade depends largely on the practical experience of foreign investors participating in the Vietnamese stock market.
Therefore, in a recent sharing, Ms. Vu Thi Chan Phuong, Chairwoman of the State Securities Commission, also emphasized the role of joint efforts between market members in providing services, listed companies, especially large listed organizations in the issue of transparent information disclosure, information disclosure in English, corporate governance according to good practices...
Two of the points that need to be improved that MSCI pointed out are, in addition to the registration process for opening an account for foreign investors, the disclosure of information on legal regulations and enterprises in English so that foreign investors can access and grasp them promptly - equally with domestic investors. If these points are improved, being included in the MSCI watchlist will also be an important milestone for the Vietnamese stock market since its inception.
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