Jun 24, 2019 / 13:04

Japan brings three-decade experience to help Vietnam develop equity market

The Hanoitimes - Japanese experts have addressed challenges to help Vietnam boost its financial market.

Japan, through the Japan International Cooperation Agency (JICA), has helped Vietnam improve the country's equity market in a three-year project starting from March 2019. 
Kawabe Eiichiro, Deputy Commissioner for International Affairs at JFSA, introduces lessons for Vietnam. Photo: JICA
Kawabe Eiichiro, Deputy Commissioner for International Affairs at JFSA, introduces lessons for Vietnam. Photo: JICA
Under the framework of the JICA-funded project named “Capacity Building on Improving Fairness and Transparency of Vietnamese Equity Market”, JICA’s strong team of top Japanese experts from Japan Exchange Group, Daiwa Research Institute and Nomura Research Institute provide support directly to the State Securities Commission of Vietnam (SSC) and the two stock exchanges in Hanoi and Ho Chi Minh City. 

The project is hoped to bring the best international practices to Vietnam. Among the supporters, the Japan Financial Services Agency (JFSA) has demonstrated “History and restructuring of Japanese securities market since 1980s” which could lay many lessons learnt for Vietnam.

JICA Chief Representative in Vietnam Konaka Tetsuo said at a seminar in Hanoi last week that in the financial sector, JICA has conducted a series of projects on state-owned enterprises, promoting competitive policies, and taxation reforms. 

In the coming years, Vietnam needs to improve the fairness and transparency to make the equity market attractive to investors and an open capital market for businesses, he said.  

Kawabe Eiichiro, deputy commissioner for International Affairs at JFSA, said Japan will share both effectiveness and shortcomings with Vietnam since late 1980s when Japan experienced financial bubbles with non-transparent transactions, rising loans, debts, and land prices. 

After experiencing a plunge in the prices of stock and land in 1989, Japan realized the need to develop a stable financial market. 

Accordingly, it focused on improving legal framework that aims to prevent risk from indirect credit (bank loans) and allocate capital in different industries of the economy; to supervise the market to ensure transparent transactions by investigating non-transparent deals and punishing those deliberately infringe laws. 

The establishment of the Japan Securities Depository Center (JASDEC) has contributed more to the improvement of the stock market, gaining investors’ trust, said Kawabe Eiichiro. 

Therefore, the official produced some approaches to boost the equity market. 

Japan plans for consolidation of stock and commodity exchanges. Photo: Nikkei
Japan plans for consolidation of stock and commodity exchanges. Photo: Nikkei
Firstly: the establishment of self-management organizations which are formed in cooperation between the stock exchanges and businesses (for example Japan Securities Dealers Association) issues regulations on preventing violations and protecting investors. In addition, they analyze symptoms of violating transactions and report to the stock exchanges. 

Secondly: digital measures, for example AI helps the watchdogs disclose information posted on social networks which may affect investors’ decisions. In short, by applying informatics technology, authorities are able to improve supervising ability, train qualified manpower, and store more data, helping avoid unfair deals. 

Thirdly: operating stock exchanges smoothly aims to ensure the liquidity and reasonable prices in the market which are considered important missions to keep the economy on the right track. 

Accordingly, the Tokyo Stock Exchange (TSE) came into being in 2013 when the Tokyo Stock Exchange merged with Osaka Securities Exchange. It operates with regulations and requirements required for stocks listed in four sections namely First Section for large companies, Second Section for medium-sized companies, Mothers section for high-growth and emerging startups begun in 1999, and Jasdaq Section. 

The classification gives a boost to companies which are trying to list in the higher markets as a way to raise their value. 

Fourtly: Japan plans consolidation of stock and commodity exchanges. The timeline is scheduled for 2020.

Accordingly, Japan Exchange Group and the Tokyo Commodity Exchange are eyeing an integration that would consolidate securities and commodities futures trading, allowing the combined unit to join the ranks of the world’s leading marketplaces, according to Nikkei.

Trading a wide variety of products on a single exchange would improve convenience for investors and attract more participants to the market, which in turn would improve liquidity and enable more flexible trading.

By running a common market, it also aims to publicize listed companies’ information in an exact and understandable for investors. In addition, they aim to provide non-financial information like business administration and business plans. 

Fifthly: the country has set focus on business administration to raise their value and therefore boost the availability of capital flows for the economy, Kawabe Eiichiro noted.