Twenty years is a long way to go for the stock market of a developing country like Vietnam. During that time, per capita gross domestic product (GDP) increased about 7 times and Vietnam has grown from a poor country to a middle-income country. The S-shaped country has been deeply involved in the world economy with the normalization of trade relations with the US, joining the World Trade Organization WTO and signing a series of free trade agreements. with most major powers in the world, including new generation agreements such as CPTPP, EVFTA, EVIPA … Therefore, it is not difficult to see the results achieved by the stock market when it is clear. role is an important capital channel of the economy, according to many quantitative perspectives such as size of capitalization, investor base, number of products, daily transaction scale … or qualitative like the professionalism of the members … However, there are still things that have not been done. One of them is the market upgrade.
Back in history, before 2008, MSCI – one of the companies specializing in providing indices, divided the world stock market into two categories: developed market and emerging market ). In the face of investors wishing to seek opportunities in new markets, which are not qualified to be in the above two groups but have good growth potential, MSCI creates another group, the frontier market. market). Vietnam has been on this list since its inception.
In the early stages of the stock market development, perhaps no one cares where Vietnam is on the world map and how to professionally attract more foreign investment. Vietnam, until now, is still a market for individual investors, accounting for 80-90% of the transaction value. During the 2006-2007 boom, foreign investors poured capital into Vietnam to anticipate the growth of an Asian tiger in the future, not because the stock market met the minimum standards. can be invested.
A little rambling, foreign investors entered Vietnam at this stage with different sizes and tastes. Perhaps the earliest Japanese investors, both institutional and individual. At this stage, I also participated in writing reports on companies listed on the Vietnamese stock market in Japanese, not exceeding 3 pages, targeting housewives who did not have much time. time to read.
Followed by Thai investors, hard to find small and medium-cap companies, whose stories rise in hopes of similar success as home businesses. Most recently, Korean investors have landed more methodically, when the number of Korean companies investing in Vietnam is increasing and relatively successful. Korean investors bring securities companies, fund management companies and even new investment products (such as index funds – ETFs) with long-term investment goals in Vietnam. opportunities at home have become difficult while abroad has the advantage of tax.
Going back to the original story in more detail, the first time I heard about the plan to upgrade the stock market as classified by MSCI was in 2014, when attending a meeting at the Securities Commission. About a year later, the Prime Minister issued Decree 60/2015, increasing the ownership rate for foreign investors participating in Vietnam’s stock market from 49% to 100% for enterprises not in the list of industries. conditional business. Since then, the upgrade story has become a hot story every time MSCI publishes the results of its annual review at the end of June. And a simple comparison is looking back at MSCI’s assessments of Vietnam’s market access in 2014 and 2020, to see what we’ve done.
There is exactly one point which is more positively assessed than opening a new account, because in this period it is possible to open a trading account online … With all the remaining indicators, there is no significant change. Expectations and disappointments about MSCI’s upgrade story intertwined throughout the years 2016-2020.
Another institution involved in market ranking and construction of investment indices is the FTSE Russell. This organization evaluates the cooperation of Vietnamese market regulators and recognizes the efforts to develop and enhance capital markets. However, Vietnam still has an unmet criterion of payment.
Compared to the assessment from FTSE Russell, it seems that MSCI is more strict with Vietnam. There is also an opinion that MSCI is difficult to approach, so it is difficult to exchange views between the parties, or it may also be due to the gathering of investors consulted by the organization, which is not goodwill with Vietnam after much. unsuccessful investments in the past.
In the short term, perhaps there is no need to rank up, but Vietnam still benefits because investment funds can still spend a certain proportion (about 5%) in off-benchmark markets. market). Moreover, with many Vietnam dedicated fund, investment review activities are often more flexible due to understanding of the operating mechanism rather than compliance and transparency requirements.
In addition, Vietnam remains a favored frontier market, while most Southeast Asian countries were emerging markets before the HCM City Stock Exchange was established. The Vietnamese market – like making a big fish in a small pond, sometimes better than making an anchovy in the vast ocean. The notion of not ranking up at all costs has proved reasonable.
However, in the coming time, to be able to attract more capital flows from large, professional investment funds (for example mutual funds, pension funds …) capital Compliance is very high, there is no other way that all activities in the market must comply with international standards and practices.
More optimistic, there is still reason to believe that the possibility of Vietnam being included in the watch list and then upgraded in the coming time when the revised Securities Law comes into effect and if the Corresponding changes in the Investment Law, Enterprise Law can help increase the market access of foreign investors, and factors related to the transaction system, infrastructure … are solved. decisions on the establishment of the Vietnam Stock Exchange. In particular, the application of a payment mechanism under the central clearing partner (CCP) model to the underlying stock market is also expected to solve the pre-funding problem that FTSE also has. and MSCI both consider the minus point of the Vietnamese market.
* The article shows the author’s personal opinion, not necessarily the opinion of the editorial or organization.