Vietnam records important progress towards stock market status upgrade: CEO

Vietnam has made significant progress in the country's journey to upgrade its stock market status from “frontier” to “emerging”, given the strong efforts of regulators and market operators, said Huang Bo, CEO of Guotai Junan Securities Vietnam (IVS).

According to the CEO, this year, the stock market will not only be an attractive investment channel but also an efficient capital-raising channel to fund the country's large infrastructure projects, contributing to achieving the GDP growth target of "at least 8%".

In reality, the market has increasingly proven its role by helping companies raise medium- and long-term capital, which in turn would allow them to operate efficiently and contribute more to the economy. Many securities companies have been enhancing their financial strength, scale, and quality to meet the growing needs of investors, he noted.

At the “Pho Tai Chinh” (Financial Street) talkshow on Monday, Huang Bo assessed that in the past two decades, Vietnam’s major bourse Ho Chi Minh Stock Exchange (HoSE) and the Hanoi Stock Exchange (HNX) have grown remarkably, with the HoSE capitalization increasing 23 times. The Vietnamese market capitalization is now equivalent to 60% of GDP, with over 1,600 stocks.

The stock market has made significant contributions to the national economy. First, it has helped raise capital for infrastructure and industrialization. Listed companies in the energy, banking, real estate, and manufacturing sectors have raised trillions of VND (VND1 trillion = $39.28 million) through issuing stocks and corporate bonds.

Second, it has promoted the equitization of state-owned enterprises (SOE) and improved operational efficiency. The government's equitization of SOEs, including Vietcombank and Vinamilk, has contributed to increasing market liquidity and improving operational efficiency through transparent mechanisms and public accountability. By connecting idle domestic capital with investments in production, the stock market is supporting the country's goal of becoming a hub for high-tech manufacturing.

Third, it has helped improve corporate governance, transparency, and foreign investment attraction. Public listings require Vietnamese companies to adopt international standards on transparency and corporate governance.

Relaxing foreign ownership limits and the inclusion of Vietnam in FTSE Russell’s watchlist for market status upgrade will attract funds from ETFs and pension funds. In 2024, foreign investors accounted for nearly 25% of total trading value, pouring funds into high-growth sectors such as green energy, semiconductors, and consumer goods.

Fourth, the stock market has supported small and medium-sized enterprises (SMEs) and startups. Alongside large corporations, Vietnam’s stock market is gradually becoming a springboard for SMEs.

The Unlisted Public Companies Market (UPCoM) has allowed smaller companies to access capital without meeting stringent listing requirements. Many startups in digital services, agriculture, and clean energy have leveraged this fundraising channel to invest in R&D and expand their businesses.

If strong reforms continue, the Vietnamese stock market could play a role similar to that of South Korea or China, helping the economy arise from an emerging market to a global innovation hub, Huang Bo said.

Ample room for growth

To promote the role of the stock market in Vietnam's economic growth, the IVS leader believed that policymakers should prioritize strategies such as enhancing liquidity and market accessibility.

The recent amendments to the Securities Law demonstrate a strong commitment to market development. He expected that upgrading trading infrastructure, the launch of the modern KRX trading system, and the expansion of the derivatives market will attract institutional investors. Reducing transaction costs and relaxing margin requirements could encourage individual investor participation.

It is essential to strengthen the legal framework and accelerate reforms to adjust disclosure standards to international norms such as the International Financial Reporting Standards (IFRS). Encouraging Environment, Social and Governance (ESG) reporting could also allure capital flows from funds focused on sustainable development, he noted.

Huang Bo also stressed the need to urge tech companies to list by providing tax incentives and regulatory exemptions for tech firms, along with a proposal to establish an “innovation exchange”. Collaborating with venture capital funds to support promising tech companies listing could follow the model of the Shanghai Stock Exchange’s STAR market.

Finally, foreign ownership limits in strategic sectors such as banking and renewable energy should continue to be relaxed, while the process of upgrading Vietnam’s market status to "emerging" needs to be accelerated, he added.

According to the CEO, Vietnam has made significant progress in its market status upgrade journey, given the strong efforts of regulators and market operators such as the State Securities Commission (SSC), Vietnam Securities Depository and Clearing Corporation (VSDC), and related agencies.

According to these organizations, Vietnam has essentially met the necessary conditions for an upgrade from "frontier" to "emerging" under FTSE’s standards. Furthermore, the upcoming deployment of the KRX trading system will enhance liquidity, speed up order processing, and create conditions for the development of derivative products.

Along with efforts to strengthen the legal framework through accelerating reforms to standardize information disclosures per international standards, the requirement for bilingual disclosures is already instilling confidence in international investors. The outlook for an upgrade in 2025 is positive, he assessed.

Huang Bo believed that this year, Vietnam's stock market will have many opportunities for strong development, including the chance for an upgrade to emerging market status, an increase in corporate profits, and attraction of more foreign institutional investors once the new trading system is operational.