On December 6th, the Financial Investment Magazine organized a seminar titled "Overview of the Capital Market in 2024 and Prospects for 2025".

According to Ms. Ta Thanh Binh, General Director of the Vietnam Securities Depository and Clearing Corporation (VSDC), in a recent meeting, FTSE Russell, the market rating agency, confirmed that Vietnam has met 7 out of 9 criteria for upgrading its stock market status.

Two areas needing improvement include removing the mandatory prefunding requirement for foreign investors before trading and addressing failed trade management.

Regarding the first criterion, the Ministry of Finance recently issued Circular 68/2024/TT-BTC, which significantly removes the mandatory deposit requirement for foreign investors.

With the final criterion for upgrading being the handling of unsuccessful transactions, according to Ms. Binh, the solution is to apply a central clearing and settlement (CPP) mechanism.

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Ms. Ta Thanh Binh - General Director of VDSC. (Photo: VietnamFinance).

The new regulations in the recently passed Securities Law have paved the way for the securities industry to continue implementing solutions to upgrade its rating to MSCI standards. By June 2024, the Vietnamese stock market had met 10 out of 18 criteria.

Some criteria still need improvement, such as the foreign ownership limit, the remaining foreign ownership limit, and the degree of liberalization of the foreign exchange market, which has not yet been met…

Ms. Binh affirmed that, with institutional reforms, the market will receive a large influx of capital. However, this also raises concerns about the pressure on the system due to the large volume and value of transactions and the faster frequency of transactions.

"The increased frequency and intensity of transactions could put considerable pressure on the trading and clearing/settlement systems. In addition, there are issues related to whether the foreign exchange conversion system can adequately handle such a large volume of transactions," Ms. Binh stated.

According to Ms. Binh, the pressure to maintain the upgrade after meeting the new rating criteria will also be a challenge for stakeholders. The Pakistani stock market was once upgraded but then downgraded to a frontier market.

According to Mr. To Tran Hoa, Deputy Director of the Market Development Department (State Securities Commission), Circular 68 amends and supplements several articles of the circulars regulating securities transactions on the securities trading system; clearing and settlement of securities transactions; and the operation of securities companies.

The circular has added regulations regarding share purchase transactions that do not require sufficient funds when placing orders by foreign institutional investors and has set out a roadmap for implementing information disclosure in both Vietnamese and English.

This provides a legal basis for foreign investors to participate in the Vietnamese stock market at lower costs while minimizing risks for investors.

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Mr. To Tran Hoa, Deputy Director of the Market Development Department, State Securities Commission. Photo: VietnamFinance

On November 29th, the National Assembly passed the amended Securities Law, focusing on three main policy areas: enhancing transparency and efficiency in issuance activities, further improving regulations to strengthen supervision, and strictly handling fraudulent and deceptive practices in issuance activities.

"These regulations promote the responsibility of relevant organizations and individuals to ensure and promote the development of the stock market," Mr. Hoa said.

In order to ensure the continuous, smooth, stable, and transparent operation of the stock market in 2025, Mr. Hoa said that the State Securities Commission will continue to prioritize solutions to achieve the goal of upgrading the stock market's ranking as soon as possible.

At the same time, we will continue to implement the solutions outlined in the action plan for the implementation of the Securities Market Development Strategy until 2030.

Mr. Nguyen Quang Thuan, General Director of FiinGroup, believes that the Vietnamese stock market is a "battle" between 9 million individual accounts, including 3-4 million individual investors, and foreign investors. Therefore, it is necessary to focus on information transparency and promote domestic investment funds to "compete" with foreign investors.

Foreign investors are very reluctant to cut their losses, but individual investors are currently losing money (during 2021 and early 2024). Because foreign investors invest through funds and for the long term, they rarely lose money, whereas individual investors are more likely to lose money at the moment, partly due to their short-term trading mindset.