Vietnam stock market may be upgraded to emerging status before 2025

Vietnam’s stock market is in favorable position to get upgraded to emerging status before 2025, a target set by Prime Minister Nguyen Xuan Phuc, according to Tran Van Dung, chairman of the State Securities Commission of Vietnam (SSC).

Tran Van Dung, chairman of the State Securities Commission of Vietnam (SSC).

The head of Vietnam’s stock market watchdog made the statement at the press conference following the conclusion of the 33rd ASEAN Capital Markets Forum (ACMF) on December 9.

Vietnam is currently in the Frontier Market group, and was added to global provider of financial services FTSE Russell’s watchlist for possible upgrade to Secondary Emerging Market in September 2018. However, after one year of review, Vietnam only met seven out of the nine criteria of FTSE.

On the prospect of the stock market in 2021, Mr. Dung expected “a few positive notes”, referring to a number of laws that set to kick in on January 1, 2021, that ensures a more transparent investment environment, including the revised Securities Law, the Law on Investment and the Law on Enterprises.

“This is a plus point for the Vietnamese economy,” he said.

In 2021, the Ho Chi Minh City Stock Exchange (HoSE), home to the majority of large-caps, is set to put into operation an IT system that allows investors to short-sell shares or go for intraday trading, Mr. Dung said, adding these activities are among criteria for stock market reclassification.

Mr. Dung also pointed to Kuwait’s recent upgrade to the emerging market status, which could lead to an increase in Vietnam’s weight in the MSCI Frontier Market Index to nearly 26% and solidify the uptrend of the Vn-Index in the coming years.

The SSC is actively cooperating with MSCI and FTSE Russell to discuss solution for a possible upgrade of Vietnam’s stock market.

On December 17, the agency is scheduled to hold a virtual meeting with FTSE Russell to update the latter on the current policies and situation of the stock market, as well as to receive feedback for further improvements.

After the meeting, the SSC said it will continue to work with the MSCI to understand its requirements in classifying market upgrade amid the Covid-19 pandemic.

Three factors accelerating stock market recovery

The Vn-Index since its 25% slump in March has now recovered by around 400 points to over 1,000 and averaged a liquidity per trading session of VND10 trillion (US$431.6 million).

Mr. Dung attributed a strong rise in the stock market to government’s supporting policies, sound economic outlook and firm resilience of Vietnamese enterprises.

“Despite recent resurgences of the Covid-19 pandemic, Vietnam’s economy remains largely unscathed, which reflects efforts from the government in keeping the economy running,” he noted.

While the Covid-19 pandemic is causing severe impacts on services and aviation, 84% of public firms continue to be profitable, which is a sign that local enterprises are adapting well to a new normalcy, Mr. Dung continued.

“A low interest environment that comes from the State Bank of Vietnam’s decision in cutting policy rates have also prompted investors to turn to the stock market.”