Vietnam is on the verge of introducing a new stock trading system designed to speed up trade settlement, a move aimed at reforming the market that could raise its profile and attract more international investors. The system, provided by the Korea Exchange, is expected to go live on May 2, after extensive testing and a five-day transition period during the holiday that begins after business hours on April 26.
The initiative is a key part of Vietnam’s strategy to be reclassified as an emerging market by major index providers such as MSCI and FTSE, which currently classify Vietnam as a frontier market, limiting investment from various funds and financial institutions.
The change promises to speed up settlement of trades to within a day, which is expected to boost trading capacity, especially for activities such as short selling, which have been hampered by the current slower system. Officials have indicated that FTSE could announce a positive reclassification as early as September, with the process likely to be completed next year. However, the MSCI reclassification is expected to take a longer timeframe.
The World Bank forecast last year that the market upgrade could result in net capital inflows of $5 billion to $25 billion into Vietnam’s stock market by the end of the decade. While Vietnam’s benchmark stock index has gained 4.51 percent so far in 2024, it has fallen more than 71 percent this month.
For the upgrade to become a reality, key reforms are needed, including easing foreign ownership limits in listed companies and removing pre-funding requirements for equity transactions. A public consultation on a new mechanism to overcome the funding hurdle is expected to conclude in the second half of May.
Source: Investing
