September 23, 2018 15:49

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Stock Market: many works have to be done to upgrade

10:51 | 13/11/2017

VCN- In order to be upgraded from a startup to a new MSCI standard, according to experts, Vietnam's stock market needs to improve a lot of issues, including accessibility criteria of foreign investors in the market.

stock market many works have to be done to upgrade
The Vietnam market has made a number of positive improvements, but some criteria have not been met yet to be upgraded. Picture: N.Hiền.

Mr. Valentin Laiseca - Head of South East Asia Market, MSCI, said that MSCI is interested in ASEAN market, including Vietnam due to the fact that this market has not been properly evaluated in terms of demographic potential as well as the potential of growth. Accordingly, the recent time Vietnam market has improved in some positive criteria, Theoretically, the Vietnamese market has been qualified to be upgraded but it is still in its infancy and has not ensured safety and sustainability. However, the Vietnamese market has the advantage that the institution is relatively stable.

In particular, Valentin Laiseca said that Vietnam basically meets the liquidity requirements to raise its initial position to the emerging group. The 14 largest companies are Considered in the Vietnam market, MSCI found that these companies met capital and liquidity requirements but only four of them met the requirement of free float ready to trade and this should be improved in the near future. In addition, Vietnam needs to improve its index of ownership limits for foreign investors and equal rights among investors. Valentin Laiseca also said that the free flow of capital and the capital into the currency market, the exchange rate for foreign investors is difficult. Although the registration of transactions of foreign investors has reduced many procedures regulations require investors to translate into Vietnamese, which causes a lot of difficulties. In addition, the information disclosure, as well as market regulations, do not have information in English that creates inequalities between domestic and foreign investors.

According to MSCI, Tran Anh Dao, deputy general director of Ho Chi Minh Stock Exchange, said that the stock market in Vietnam was ready to be upgraded and the State Securities Commission and the Securities Depository Center and the Exchange have prepared for changes when upgraded. Specifically, according to Ms. Dao, in the criteria that MSCI asked to upgrade class, the market overview of Vietnam has improved in terms of liquidity and the new listing. Since the beginning of the year, there have been 27 new listed companies, including big ones such as VietJet, VPBank ... and from now until the end of the year there will be more new listed companies. Market capitalization increased 41% to $ 92 billion; Daily trading volume increased by 43% over the same period last year, reaching 100-150 million shares per day. In terms of free float, according to HOSE statistics, the rate for the whole market is 31%, this is not low but the rate of VN30 is low (19%) for many reasons.

Dao also affirmed that ownership of foreign investors has improved. There are about 17 outlets giving 100% to foreign investors, but in practice, the ownership ratio of foreign investors in these companies is still below 49% and only about 3 out of 50%. Dao also acknowledged that many businesses are reluctant to open their rooms due to concerns about being taken over or because of the length of the room. The Information disclosure in English has also improved significantly, the 70 companies reported bilingual information, increasing significantly compared to the number of 45 in 2016. Foreign investment has also been simplified, so far this year, the number of new foreign investment accounts has increased by 17%.

However, Mr. Nguyen Khac Hai, General Director of PAN Corporation pointed out difficulties in removing the ownership of foreign investors in listed companies in Vietnam. Accordingly, the first is whether the company is willing to open the room or not. In many cases, companies fear losing control when opening the room. The next is the issue of the legal framework. Although Decree 60 stipulates that the room is open, the implementation is still difficult. For example, there are too many professions, especially sensitive ones, which are restricted to foreign investors. Therefore, in order to open the room, businesses need to see their field of activity in the sensitive sector or not. In case the company is not entangled in the sensitive business and performs room, a new issue will arise that the company will be considered as a foreign company. While the law stipulates that foreign investors are not able to invest in listed companies at a very high rate, they have to open more accounts to invest.

Relating to the publication of the report under the international standards, Hai also said that if it was transferred to the international standards, it would be very expensive to hire qualified accountants, it is necessary to upgrade the international accounting software system. ...…

Mr. Valentin Laiseca - Head of South East Asia Market, MSCI:

June every year is the time when MSCI makes decisions about upgrading or placing a market on the rating list. Accordingly, when listed in the rating, MSCI will carry out consulting investors to receive their feedback. This consultation will take place over a period of one year before making a decision. Therefore, in the best case, Vietnam may be included in the assessment list in June 2019 and upgraded in 2020. MSCI only makes the decision when it is certain that all reforms in a market are not further changed and these decisions are entirely dependent on investor feedback. This process is consistent throughout the world by MSCI. If there is not positive feedback, no decision will be made.

Khải Kỳ/Bui Diep