Monday, 17 Jun 2019

FTSE adds Vietnam to watch list for reclassification as secondary emerging

Updated at Thursday, 27 Sep 2018, 15:13
The Hanoitimes - The move is considered a welcome sign for Vietnam`s market.
FTSE Russell - a leading global provider of financial services, has added Vietnam, which is currently classified as a frontier market, to the watch list for possible reclassification as secondary emerging, stated the company in its latest report. 
Illustrative photo.
Illustrative photo.
In addition to Vietnam, Argentina and Tanzania are also included in the watch list for a possible future reclassification. 

In June, Morgan Stanley Capital International (MSCI) in its annual market classification review decided to hold Vietnam's status as a frontier market. 

According to MSCI, Vietnam has to address five issues. Firstly, openness to foreign ownership. More information on the stock exchanges and the Vietnamese Securities Depository (VSD) websites can now be found in English. However, 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. Moreover, companies in certain conditional sectors and sensitive sectors are subject to the relevant foreign ownership limit.

Secondly, foreign exchange market liberalization level. There is no offshore currency market and there are constraints on the onshore currency market (e.g., foreign exchange transactions must be linked to security transactions). 

Thirdly, Vietnam also has to improve in market regulations, for which not all regulations can be found in English. The same issue is applied with information flow. 

With regard to clearing and settlement, there is no formal clearing house and the VSD acts as the clearing agent. In addition, there are no overdraft facilities and the prefunding of trades is required. Meanwhile, in terms of transferability, off-exchange transactions and in-kind transfers require prior approval from the State Securities Commission of Vietnam.

Fourthly, MSCI was unable to provide any detail assessment on Vietnam's competitive landscape. 

Fifthly, there was no issue in related to stability of institutional framework, but improvements should be made if possible. 

At the Vietnam Economic Forum on Capital-Finance Market in Hanoi on August 21, Deputy Prime Minister Vuong Dinh Hue said the Vietnamese government is determined to work for the upgrade of the local stock market to emerging market status soon.

Chairman of the State Securities Commission of Vietnam Tran Van Dung affirmed that with drastic measures from the government in creating a level playing field for both local and foreign companies, Vietnam can achieve the target of becoming an emerging securities market in the next two years.
Hai Yen
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