Vietnam stock market still frontier market in MSCI list

The Vietnamese stock market is still classified as a frontier one, not yet an emerging market, in the June review of MSCI Inc., a leading provider of critical decision support tools and services for the global investment community.

The “MSCI 2024 Global Market Accessibility Review” is based on creteria of openness to foreign ownership, ease of capital inflows and outflows, efficiency of the operational framework, availability of investment instruments, and stability of the institutional framework. MSCI uses 18 distinct accessibility measures to assess these five criteria.

“Frontier” is the basic level of stock market per MSCI’s ratings, with upper levels being “emerging” and “developed” market. Besides, MSCI has a rating of “standalone” market for newly eligible markets and markets previously classified but witnessing severe deterioration in market accessibility or size and liquidity.

Among dozens of frontier stock markets, Vietnam was the top one, with an index market cap of $29.64 billion as of April 19, or 25.8% of the total of all frontier stock markets, according to MSCI data.

Reviewing the Vietnamese market, MSCI said Vietnam has had an improvement in its rating for the transferability criterion on the back of increased uptake for off-exchange and in-kind transactions following regulation changes. Besides, Vietnam continues to work on market development plans to address certain accessibility issues, such as foreign ownership limits, pre-funding requirements, and the lack of English disclosure of market information.

MSCI will continue to closely monitor progress on these reforms, the firm said.

Developments of the Vietnamese stock market

MSCI highlighted an improvement of Vietnam in the market transferability. “Following changes in regulation, more types of off-exchange transactions and in-kind transfers can be executed without the need for regulatory pre-approval, leading to volumes for these transactions increasing significantly in recent years.” However, the Vietnam Securities Depository Center VSDC typically takes several days to review required documentation before these transactions can be executed, MSCI added.

Regarding foreign ownership limit (FOL), MSCI said companies in certain conditional and sensitive sectors are subject to FOLs ranging from 0 to 51%. These limitations still affect more than 10% of the Vietnamese equity market.

About foreign room level, the equity market is significantly impacted by foreign room issues. More than 1% of the MSCI Vietnam Investable Market Index (IMI) is impacted by low foreign room.

For equal rights to foreign investors, MSCI noted that some company related information is not always readily available in English. In addition, the rights of foreign investors are limited as a result of the stringent foreign ownership limits imposed on both total as well as individual foreign investors.

Mentionning foreign exchange market liberalization level, MSCI stressed that there is no offshore currency market and there are constraints on the onshore currency market.

Speaking of market regulations, MSCI highlighted that not all regulations can be found in English.

About clearing and settlement, there are no overdraft facilities and pre-funding of trades is required, MSCI stated.

Stock market information is not always disclosed in English and occasionally is not detailed enough, MSCI commented on information flow.

The VN-Index closed down 0.02%, or 0.28 point, at 1,282.02 on Friday.