In the near future, in June 2025, the Vietnamese stock market may be considered by MSCI to be included in the Watch list to be upgraded to an emerging market.
BSC has just made an assessment on the prospects for upgrading the stock market. According to the report, since the somewhat less positive assessment report in March 2023 by FTSE Russell, the management agencies, especially the Ministry of Finance, the State Securities Commission and market members, have taken drastic actions and solutions to remove the remaining bottlenecks in FTSE's recommendations.
The results of the two most recent assessments (September 23 and March 24) have been more positive, and FTSE has acknowledged the efforts of the management agency - specifically the determination of the head of the Government - in resolving the remaining bottlenecks. In addition, the Government Office issued Notice 122/TB-VPCP on the Prime Minister's conclusion at the Conference on the implementation of the 2024 Stock Market Development Task: Accordingly, the Prime Minister requested the Ministry of Finance, the Ministry of Planning and Investment, and the State Bank to take urgent measures and actions to remove bottlenecks to soon upgrade the market.
Most recently, the Ministry of Finance and the State Securities Commission are seeking opinions.
market members and foreign investors in amending a number of important circulars including: Circular No. 96/2020/TT-BTC dated November 16, 2020, No. 120/2020/TT-BTC dated December 31, 2020, No. 119/2020/TTBTC dated December 31, 2020, No. 121/2020/TT-BTC dated December 31, 2020. BSC Research assesses that if the draft is approved, it will resolve most of the remaining issues in upgrading the market, including:
Regarding the issue of “pre-funding”: Basically, it has increased the authority and responsibility of securities companies in making decisions on margin trading of foreign investors with insufficient 100%. In the short term, if this draft is passed and put into pilot implementation and receives good feedback from foreign investors, it will help the stock market receive a positive assessment from FTSE – at the earliest in the assessment period in T09/2024.
In the long term, the State Bank's approval to allow custodian banks to simultaneously become clearing members in addition to clearing and settlement activities for securities transactions under the central clearing counterparty (CCP) mechanism, which is officially implemented, will be a comprehensive solution to this problem. If approved by the State Bank, the role of banks will be increased, shared with securities companies in coordinating and exchanging information to thoroughly handle the problem of non-margined transactions of foreign investors in order to minimize losses in situations where customers do not have enough money to pay when the time comes to fulfill their obligations.
Regarding the issue of information disclosure in English: A specific roadmap has been set out for market members, especially public companies, to ensure fairness in accessing information for foreign investors. This is a great effort by the management agency and requires the drastic participation of public companies in concretizing this roadmap - according to the roadmap, by 2028, public companies will be required to disclose information (periodically and irregularly) in two languages (Vietnamese and English).
If the implementation is successful, the Vietnamese stock market is likely to improve significantly in the periodic assessments of FTSE as well as MSCI when foreign investors give positive feedback on this content. In the near future, in June 2025, the Vietnamese stock market may be considered by MSCI to be included in the Watch list for upgrading to an emerging market.
In addition, amending the information disclosure regulations is the next necessary step to facilitate and standardize the process for listed/registered organizations to report and disclose information on the IDS system as well as the systems of the Stock Exchanges, creating conditions for investors - especially foreign investors - to access data in a formal, systematic and effective manner.
The efforts of the management agency since July 2023 have been very positive in proactively seeking solutions to remove bottlenecks within the authority of the Ministry of Finance and the State Securities Commission. However, to soon realize the goal of upgrading the stock market by 2025 according to FTSE Russell's ranking, the cooperation and efforts of market members are needed.
In particular, the participation and search for solutions from the State Bank and the Ministry of Planning and Investment on issues related to: foreign ownership ratio (foreign room), the role of banks in the central clearing partner payment system (CCP), thereby considering allowing depository banks to simultaneously become clearing members, building a mechanism to consider applying non-voting depository receipts in accordance with the Enterprise Law to apply to industries that limit foreign investor ownership but are still attractive enough for foreign investors.
According to BSC, ensuring equality for foreign investors (bilingual information disclosure in English...), the early implementation and operation of the KRX system is also a very important factor - when most recently the "go-live" scheduled for May 2024 could not be realized as planned, this will be a big challenge for the expectation of FTSE Russell's approval of the upgrade of the Vietnamese stock market in the September 2024 assessment period.
Source: VnEconomy
