Vietnam stock market upgrade hard to achieve if prefunding issue not fixed: regulator

By Ta Phu, Huong Dung
Fri, September 1, 2023 | 8:17 pm GMT+7

Prefunding requirement and foreign ownership limit are now the largest obstacles facing the upgrade of the Vietnamese stock market and will require practical coordination between relevant ministries and agencies to remove.

The remark was made by chairwoman of the State Securities Commission (SSC) Vu Chan Phuong while chairing a meeting with institutional investors and partners themed “Unlocking the potential of Vietnamese stock market” in Hong Kong earlier this week.

The conference was jointly organized by the SSC and the Asia Securities Industry & Financial Markets Association (ASIFMA) with the support of the World Bank Group (WB) to discuss solutions to upgrade the Vietnamese stock market from frontier to emerging.

Upgrading the stock market is one of the major goals the Vietnamese government is aiming for, Phuong said, adding that it was included in the project "Restructuring the stock and insurance markets to 2020 with orientation to 2025" and in the draft "Strategy on Stock Market Development until 2030". “Vietnam aims to upgrade its stock market from frontier to emerging by 2025,” she noted.

Chairwoman of the State Securities Commission (SSC) Vu Chan Phuong speaks at a meeting with institutional investors and partners in Hong Kong, August 29, 2023. Photo by The Investor/Ta Phu.

Chairwoman of the State Securities Commission (SSC) Vu Chan Phuong speaks at a meeting with institutional investors and partners in Hong Kong, August 29, 2023. Photo by The Investor/Ta Phu.

According to the SSC leader, in recent years, the regulator has shown great efforts and determination to promote and shorten the market upgrade roadmap. In terms of the legal framework, the Securities Law 2019, the Investment Law 2020, the Enterprise Law 2020 and guiding documents have gradually met the criteria for the upgrade by facilitating investment capital flow, access to information in English, account registration and opening by investors; strengthening disciplines; and strictly handling violations to make the market more transparent.

“Besides growing in size and liquidity, Vietnam's stock market is becoming more transparent and healthy as many violations have been strictly handled,” she stated.

Many businesses, including all large-cap firms in the VN30 group, have been proactive in disclosing information in English, she said, adding many new issues supporting the market upgrade have also been more clearly defined in the government’s Decree 155/2020/ND-CP dated December 31, 2020 and the Ministry of Finance’s Circular 96/2020/TT-BTC dated November 16, 2020.

In the near future, the SSC will continue to propose amendments to relevant legal documents to ensure that the stock market becomes more transparent, open and sustainable, aiding the upgrade process, Phuong said.

"Vietnam's efforts in both legal amendments and practical solutions have created more favorable conditions for foreign investors to participate in Vietnam's capital markets," she added.

The regulator has regularly communicated with Morgan Stanley Capital International (MSCI) and FTSE Russell, a subsidiary of the London Stock Exchange Group (LSEG), to update them on the real situation in the Vietnamese stock market.

At the meeting, rating agencies and major international financial institutions assessed that Vietnam has made many improvements and met a number of important criteria. However, they noted prefunding requirement and strict limits on foreign ownership of shares are among the main hurdles to Vietnam's emerging market status upgrade. Of which, the prefunding requirement is seen as the main problem.

Investors usually settle their trades two days after a deal in open markets, but in Vietnam they have to ensure the availability of funds prior to trade execution, which adds a significant cost for traders who execute multiple daily operations.

The other major hurdle is Vietnam’s strict limit on foreign ownership, which for banks is as low as 30% and has already been attained for many top lenders. Foreign investors are lobbying for gradually raising the limit to 35%.

Both issues require practical coordination among relevant agencies and ministries such as the State Bank of Vietnam (SBV) and the Ministry of Planning and Investment to solve, they said.

According to investors, to upgrade the stock market, Vietnam needs to implement a central counterparty clearing house (CCP) model as stipulated in Decree 155, in which depository banks must become CCP members and fully disclose the maximum foreign ownership ratios of conditional business lines.

Particularly for prefunding, when permitted by the SBV, the implementation of the CCP system is the optimal solution to handle the issue. If this issue cannot be fixed, a stock market upgrade will be very difficult to achieve.

While waiting for the CCP, the regulator is studying immediate technical solutions to minimize foreign investors' concerns regarding prefunding, Phuong noted.

Closing Thursday, Vietnam's benchmark VN-Index had surged 10.89 points, or 0.90%, to 1,224.05, marking its fourth straight gaining session.

Comments (0)
  • Read More
Flexibility, adaptability key to effective leadership: PepsiCo Vietnam exec

Flexibility, adaptability key to effective leadership: PepsiCo Vietnam exec

In a rapidly changing world, leaders need to develop the skill of being “as flexible as seaweed,” says Nguyen Viet Ha, general director of PepsiCo Foods Vietnam.

Companies - Wed, November 20, 2024 | 3:52 pm GMT+7

Central Vietnam province okays $88 mln automobile part project

Central Vietnam province okays $88 mln automobile part project

Binh Thuan province's industrial zone authority on Tuesday granted an investment registration certificate to a $88 million project invested by Taiwan’s NeoSCM Limited.

Industries - Wed, November 20, 2024 | 3:44 pm GMT+7

Thai packaging firm Thantawan Industry makes inroad into Vietnam

Thai packaging firm Thantawan Industry makes inroad into Vietnam

Thantawan Industry Public Company Limited, a leading Thai manufacturer of premium plastic packaging, has inked a deal for a 30-year factory lease, marking its inaugural investment in Vietnam.

Industries - Wed, November 20, 2024 | 3:34 pm GMT+7

Developer Novaland gets legal hassles cleared for satellite urban area bordering HCMC

Developer Novaland gets legal hassles cleared for satellite urban area bordering HCMC

Major property developer Novoland has had legal obstacles for its Aqua City project cleared after Dong Nai Chairman Vo Tan Duc approved Tuesday a critical adjustment to the southern province’s urban development plan.

Companies - Wed, November 20, 2024 | 2:29 pm GMT+7

Pegatron to quadruple workforce at $800 mln project in Vietnam

Pegatron to quadruple workforce at $800 mln project in Vietnam

Pegatron Vietnam, a subsidiary of Taiwanese electronics manufacturer Pegatron Corporation, is set to soon quadruple the company's workforce for its $800-million project in Vietnam.

Industries - Wed, November 20, 2024 | 2:03 pm GMT+7

Thailand’s WHA greenlighted to invest $55 mln in central Vietnam industrial park

Thailand’s WHA greenlighted to invest $55 mln in central Vietnam industrial park

WHA Group, a leading Thai provider of fully integrated logistics and industrial facilities solutions, has secured in-principle approval from the Vietnamese government to invest in an industrial park in central Vietnam.

Industrial real estate - Wed, November 20, 2024 | 12:01 pm GMT+7

Indonesia, Brazil sign cooperation deals worth $2.65 bln

Indonesia, Brazil sign cooperation deals worth $2.65 bln

Indonesia and Brazil on Monday sealed cooperation agreements worth $2.65 billion in the areas of renewable energy, sustainable agriculture and technology at the Indonesia-Brazil Business Forum held in Rio De Janeiro, Brazil, on the sidelines of the G20 Summit.

Southeast Asia - Wed, November 20, 2024 | 11:57 am GMT+7

Nusantara not yet feasible as Indonesia’s capital city: authorities

Nusantara not yet feasible as Indonesia’s capital city: authorities

Indonesian Minister of Home Affairs Tito Karnavian said Jakarta still holds the capital status despite the enactment of State Capital Law No. 3 of 2022, adding that the capital city will officially be relocated after the president issues a presidential decree.

Southeast Asia - Wed, November 20, 2024 | 11:55 am GMT+7

Malaysia’s Halal industry to make up 10.8% of GDP by 2030

Malaysia’s Halal industry to make up 10.8% of GDP by 2030

Malaysia’s Halal industry is projected to account for 10.8% of the country's GDP by 2030, with an estimated value of RM231.1 billion ($51.7 billion).

Southeast Asia - Wed, November 20, 2024 | 11:48 am GMT+7

Thailand takes more fiscal measures to sustain growth momentum

Thailand takes more fiscal measures to sustain growth momentum

The Thai government is working on a raft of fresh fiscal measures to sustain an economic recovery, foster new foreign investment, and lower the near-record household debt, says Thai Prime Minister Paetongtarn Shinawatra's top aide.

Southeast Asia - Wed, November 20, 2024 | 11:46 am GMT+7

Indonesia named world's most generous country in 2024

Indonesia named world's most generous country in 2024

Indonesia has been the world's most generous country for the seventh consecutive year since 2017, reported local weekly magazine Tempo.

Southeast Asia - Wed, November 20, 2024 | 11:41 am GMT+7

Work begins on Mitsubishi Estate’s $55 mln logistics facility in northern Vietnam

Work begins on Mitsubishi Estate’s $55 mln logistics facility in northern Vietnam

Logistics facility brand Logicross, under Japan’s Mitsubishi Estate, kicked off the construction of its Logicross Hai Phong ready-built warehouse in Vietnam’s northern city of Hai Phong on Tuesday.

Industrial real estate - Wed, November 20, 2024 | 10:58 am GMT+7

French logistics giant eyes to launch electric barges on inland waterways in Vietnam

French logistics giant eyes to launch electric barges on inland waterways in Vietnam

CMA-CGM Group, a French shipping and logistics company, has plans to deploy electric barges, initially on inland waterways in Vietnam.

Companies - Wed, November 20, 2024 | 10:43 am GMT+7

2025 a turning point for Vietnam stock market: broker

2025 a turning point for Vietnam stock market: broker

Vietnam's stock market has struggled to capture the attention of both domestic and foreign investors in recent months, reflected by persistent foreign capital outflows and a steady decline in market liquidity, but next year will be a turning point for the market, says Chen Chia Ken, CEO of Phu Hung Securities JSC.

Finance - Wed, November 20, 2024 | 7:07 am GMT+7

Construction trio keen on building $1.5 bln expanded expressway in southern Vietnam

Construction trio keen on building $1.5 bln expanded expressway in southern Vietnam

Three construction majors in Vietnam are interested in building an expanded expressway connecting Ho Chi Minh City with the Mekong Delta provinces of Long An and Tien Giang for an estimated VND38.6 trillion ($1.52 billion).

Infrastructure - Tue, November 19, 2024 | 8:18 pm GMT+7

Singapore, Germany upgrade relations to strategic partnership

Singapore, Germany upgrade relations to strategic partnership

Singapore and Germany have decided to elevate their ties to a Strategic Partnership to promote closer cooperation in areas of mutual interest such as security, artificial intelligence (AI) and clean energy.

Southeast Asia - Tue, November 19, 2024 | 8:01 pm GMT+7