2023 in review: Vietnam’s Top 10 stock market events

Vietnam’s stock market saw several landmark events in 2023, including the Prime Minister’s order to upgrade the market from “frontier” to “emerging", and corruption scandals. Here below are the top 10 events.

PM orders drastic solutions to upgrade stock market

In a dispatch dated December 13, Prime Minister Pham Minh Chinh directed the Ministry of Finance to coordinate with the State Bank of Vietnam, the Ministry of Planning and Investment and relevant agencies to “drastically implement” necessary tasks and solutions to upgrade Vietnam's stock market from “frontier” to “emerging” status at the earliest. He said this would attract more foreign capital and institutional investors.

Market upgrade is one of seven goals set by the government in the restructuring and development roadmap it has drawn for the stock market until 2025.

More than two decades since its inception, the country’s stock market has a capitalization of $246 billion with an average daily trading value of about $1 billion and nearly 50 companies capitalized at over $1 billion.

Despite outstanding growth, Vietnam's stock market, the Morgan Stanley Capital International (MSCI) and FTSE Russell, a subsidiary of the London Stock Exchange Group (LSEG), have kept the country on the list of frontier markets, likening it to "a big fish in a small pond".

Vietnamese stocks account for the highest proportion in frontier market indexes, 29% on the MSCI index and 38% on the FTSE Russell's index.

If Vietnam is upgraded to emerging market status, passive investment funds will pour billions of dollars in new capital into Vietnam, experts have said.

Trading platform launched for private placement corporate bonds

After "racing against time," in just nine months, the secondary trading market for private placement corporate bonds (PPBs) was officially launched on July 19 at the Hanoi Stock Exchange (HNX).

This is considered an important milestone in the journey of developing the Vietnamese corporate bond market in a more transparent, healthy and sustainable direction.

The PPBs trading system will help increase transparency and limit transaction risks for investors, thereby promoting liquidity as well as creating conditions for the primary market to develop more sustainably, experts said.

It will also help state management agencies do their job better and enable people and businesses to monitor transactions, thereby improving market profile and transparency, they added. More than five months later, the PPBs trading market showed stable and safe operations with increased liquidity.

By end November, 206 issuers had registered to trade 760 bond codes with a value of VND519.4 trillion ($21.4 billion). From July 19 to December 25, the total transaction value reached VND189,976 billion ($7.83 billion), with an average liquidity of over VND1.6 trillion ($65.93 million) per session.

Strong impacts of interest rates, exchange rate fluctuations

In March, the State Bank of Vietnam began to reduce interest rates, going against the worldwide trend. In just three months, there were four cuts in policy interest rates and deposit interest rate ceilings.

This drastic action caused the VND interest rate to drop sharply and the Vietnamese stock market recorded a long streak of gains between May and September with the VN-Index, representing the Ho Chi Minh Stock Exchange (HoSE), expanding more than 20%.

However, the strong interest rate reduction resulted in a sharp increase in domestic USD prices, alongside a global upward trend due to continuous interest rate hikes by the U.S. Federal Reserve (Fed).

By the end of August, the VND/USD exchange rate had crossed the threshold of VND24,000. Exchange rate fluctuations caused foreign capital to flow out of the Vietnamese stock market on a large scale.

On September 21, 2023, the central bank issued treasury bills to support the exchange rate, causing the stock market to fall into a period of corrections that lasted until early November with a decrease of about 18%.

On November 8, as the T-bill issuance ended and the Fed stopped raising interest rates, the domestic exchange rate peaked and the stock market stabilized.

Cleaning up investor account data

November recorded the first sudden decrease in stock accounts when more than 545,000 accounts were deleted from the system. The number of deleted accounts was many times that of new accounts.

This development was attributed to securities companies cleaning up account data, especially handling the "legacy" from an earlier period when accounts were opened during firms’ equitization process, including employee accounts and those on the over-the-counter (OTC) market.

Since the deleted accounts were inactive ones, the deletion did not affect the market’s normal trading activities.

At the beginning of October, Prime Minister Pham Minh Chinh requested the State Securities Commission to connect the national population database and clean up data of people engaged in stock trading.

Vietnamese firms list on foreign exchanges through backdoor listings

On August 15, electric vehicle maker VinFast's shares were officially traded on the U.S.’s Nasdaq Global Select Market, after completing a business combination with Black Spade Acquisition Co a day earlier.

This was the first time a Vietnamese enterprise had been listed on an official exchange in the U.S. (Nasdaq) through backdoor listing.

Earlier, in 2008, Cavico had gone on the OTC floor via backdoor listing and was listed on Nasdaq in September 2009, but it was delisted later because it failed to meet information disclosure requirements.

After VinFast's listing, another business, tech unicorn VNG Corporation, has plans to list on Nasdaq through its major shareholder VNG Limited, based in Cayman Islands.

Foreign capital flows backwards

2023 was the second year that the Vietnamese stock market experienced record net selling by foreign investors.

At the end of December, their total net selling value on all three exchanges - HoSE, HNX and the Unlisted Public Companies Market (UPCoM) - was more than VND24 trillion ($988.9 million). The major bourse HoSE saw VND25.7 trillion in foreign investors' net selling value.

The large net selling by foreign investors was not only influenced by the exchange rate but also the shift in global capital flows when investment funds restructured their markets.

When the Fed stopped raising interest rates and signaled rate cuts in 2024, equity funds in developed markets attracted inflows, while the performance of developing and frontier markets dipped.

Vietnam's stock market continued to receive positive ETF investment capital flows, but active funds withdrew money on a large scale.

Soft landing for private placement corporate bond market

The private placement corporate bond debt bubble "exploded" in 2022, leading to concerns about a domino collapse in 2023.

However, with the government issuing timely, flexible policies, the private placement corporate bond market was able to experience a "soft landing" in 2023. The highlight of the private placement corporate bond market in 2023 was the timely introduction of the government’s Decree 08/2023/ND-CP.

Alongside postponing some regulations in Decree 65/2022/ND-CP, Decree 08 allowed issuers to reach agreements with bondholders to extend bond payment deadlines and created conditions for issuers to pay bond principal and interest with other assets.

In addition, the State Bank of Vietnam issued Circular No. 03/2023/TT-NHNN to effect the suspension of Clause 11, Article 4 of Circular No. 16/2021/TT-NHNN, which allowed banks to buy back previously sold unlisted bonds without time restrictions if they met conditions stated in Circular 16. These regulations "saved" cash flow in the private placement corporate bond market, market observers said.

According to the Ministry of Finance, in the year to December 25, in the primary private placement corporate bond market, 79 enterprises issued VND245.9 trillion ($10.13 billion) worth of bonds, down 35.6% compared to the same period in 2022.

Compulsory delisting and absence of new listed firms

There were very few new listed stocks in 2023 due to unfavorable market developments.

Continuous losses and many information disclosure violations forced many businesses to delist and move to another exchange. On the HoSE, only five new stocks were listed this year, while 13 codes were forced to delist a total of 1.42 billion shares.

The HNX had only four new listed stocks while delisting 17 tickers.

Stronger measures against administrative violations

Regulators say that 409 sanctions were issued in 2023 with fines totalling nearly VND37 billion ($1.52 million). In some cases, additional sanctions and remedial measures were applied, including the suspension of trading, forced cancellation of or correction of information, and forced relinquishment of voting rights.

In cases with clear signs of criminal activity, regulators proactively coordinated with police agencies to investigate, clarify and take follow up action as regulated.

There were three major cases that saw criminal prosecution related to the manipulation of stocks in the FLC, Louis Holding and APEC ecosystems. In the Louis Holding case, five individuals were convicted.

Sharp decline in share issuances

2023 was a quiet year for capital mobilization after the 2021-2022 boom period with record numbers.

In 2023 through October, capital mobilization via share offerings reached VND50,527 billion ($2.08 billion), compared to VND116,684 billion during the same period in 2022 and VND102,500 billion in 2021.

There were just three initial public offerings (IPOs) with a total of 120 million shares worth VND2.6 trillion ($107.15 million); of which only one was successful.

The situation was attributed to tightened IPO and listing approval processes. Less positive market developments and plunging liquidity were also factors in the low capital mobilization via share offerings.