Vietnam has improved in its Transferability rating, thanks to increased off-exchange and physical trading following regulatory changes, but has not been upgraded yet.
According to the periodic market classification results announced on June 21, MSCI has not yet added Vietnam to the list of countries to be considered for upgrading from a frontier market to an emerging market.
According to MSCI, Vietnam has improved its Transferability rating, thanks to increased off-exchange and physical trading following regulatory changes. In addition, Vietnam continues to work on market development plans to address some accessibility issues, such as foreign ownership limits, prepayment requirements, and lack of English-language market information.
MSCI will continue to closely monitor progress on these reforms.
Previously, in the newly published global market access report, MSCI Market Rating Organization assessed that Vietnam's "transferability" criterion had been changed from needing improvement "-" to no major problems "+".
However, Vietnam still has 8 criteria that need to be improved to complete the set of 18 criteria of MSCI including: Foreign ownership limit; Foreign room; Equal rights of foreign investors; Degree of freedom in the foreign exchange market; Investor registration and account establishment; Market regulations; Information flow and finally clearing.
According to Rong Viet Securities, to be considered for upgrading according to MSCI criteria, the Vietnamese stock market needs to resolve the bottlenecks regarding (1) “foreign investor ownership limits”, (2) public company information disclosure standards, (3) trading operation mechanisms to improve “market accessibility” in the eyes of international investment organizations and indirectly increase the opportunity for market upgrading by MSCI.
In the short term, VDSC believes that bottlenecks (2) and (3) can be resolved soon and feasibly. Specifically, the mandatory application of IFRS from 2025 will help improve the “information flow” criterion to investors in the coming time. In addition, it is expected that the “pre-funding” bottleneck will be resolved when the process of collecting opinions and completing the Draft Circular amending and supplementing a number of articles of the circulars regulating securities transactions on the securities trading system is making positive progress.
Meanwhile, the bottleneck related to foreign investor ownership limits will require more time, from the efforts of managers and listed organizations.
In the report on “Evaluation of some contents related to the process of upgrading the Vietnamese stock market”, BSC highly appreciated the efforts of the management agency in standardizing the system as well as aiming to resolve the remaining bottlenecks towards the goal of upgrading the Vietnamese stock market by 2025.
BSC Securities believes that the Vietnamese stock market may be considered by MSCI to be included in the Watch list to be upgraded to an emerging market in the near future, in June 2025.
According to estimates, the capitalization of MSCI Vietnam Investable Market Index (IMI) reached 32 billion USD as of May 31, 2024. Meanwhile, the capitalization of MSCI Emerging IMI is worth 7,239 billion USD. If upgraded by MSCI, the capitalization proportion of Vietnamese stocks will account for 0.44% in the MSCI Emerging Market Index basket. This implies that there will be a capital flow of ~ 4 billion USD from foreign investment funds referring to this index pouring capital into the Vietnamese stock market. Accordingly, the added stocks all belong to MSCI Vietnam IMI.
In which the top 10 leading stocks in MSCI Vietnam IMI are compiled including HPG, VHM, VIC, MSN, VCB, VNM, SSI, DGC, VND, VRE.
The total capitalization of the Vietnamese stock market has reached over 200 billion USD, larger than the size of markets in Qatar and the Philippines. The liquidity of the Vietnamese market is high at 776 million USD/day, equivalent to regional markets such as Indonesia, Malaysia, and Singapore.
Source: VnEconomy
