VCN - Mr. Phan Linh (photo), CEO of Take Profit Vietnam Consulting and Investment Company Limited,gives comments on the future of Vietnam’s securities market.
|Looking back on 20 years of external activities of the State Securities Commission|
|More "channels" to attract securities investors|
|Remarkable 20 years of establishment and development of Vietnam’s stock market|
|Mr. Phan Linh, CEO of Take Profit Vietnam Consulting and Investment Company Limited|
Vietnam’s securities market has been operating for 20 years so far. This is not a short period for a young market. What are your assessments of the achievements of the securities market?
20 years is nearly one third of a human’s life but Vietnam’s Securities market is still at the starting period over other developing countries. However, the securities market has experienced a difficult period to gain current achievements.
On July 28, 2020, Vietnam’s securities market conducted the first trading session with two shares REE and SAM. The first five years were a difficult period because there were less listed shares. At the end of 2004, there were 26 listed shares. The encouragement of enterprises to list on the stock exchange was the top priority at that time.
Since then Vietnam’s securities market has created a cheap capital mobilization channel for enterprises. According to statistics, more than 80% of companies listed on HoSE increased their charter capital when listing on the stock exchange. Total mobilized value through supplementary issuance on the stock market from 2000 till now is VND295,000 billion with 834 issuing periods, of which in the economic restructuring period from 2010 to 2015, the mobilized value was five times higher than in the 2004 – 2009 period.
It is the fact that some companies had a high increase in charter capital such as Vingroup (43 times) Vietcombank (33 times), Refrigeration Electrical Engineering Corporation – REE (21 times) and Vinamilk (11 times).
Also, the securities market helps reduce the burden for the banking system in mobilizing medium and long-term capital and take advantages of the private sector.
Currently, trading of the FDI sector plays a significant role in the securities market. Thus, the upgrading of the securities market is an important goal that Vietnam is targeting. What does the market upgrading mean for Vietnam?
When being upgraded to an emerging market, according to calculations, Vietnam’ssecurities market immediately will receive approximately US$1 billion of passive foreign capital flow. In addition, capital flows that emerging markets attract are more stable than hot investment flows in frontier markets. At the same time, this will contribute to improving the professionalism and conditions on the investment environment of the Vietnam securities market, bringing the Vietnamese stock market to develop in quality and closer to international standards.
Recently, at the 20th anniversary of Vietnam's securities market, Prime Minister Nguyen Xuan Phuc requested management agencies to soon bring Vietnam's stock market into an emerging market. In your opinion, what are the advantages and disadvantages of the market at the moment to fulfill that target?
In fact, at the end of September 2019, FTSE Russell, a global stock index provider, announced rankings of stock markets, in which Vietnam continues to be ranked in the list of markets monitored to upgrade into a secondary emerging market. This shows that FTSE Russell acknowledges Vietnam's efforts in the improvement and development of the capital market as well as Vietnam’s constructive feedback to this organization over the past year.
According to FTSE Russell, Vietnam has now reached seven of nine criteria. Thus, there are only two criteria that have not met the requirements. They are the solvency guarantee criterion because there is no mechanism for pre-trading inspection and "clearing and settlement - T + 2 / T + 3" criterion that is still limited due to market practices in conducting pre-trading inspections.
At the request of the Government, the securities market must be upgraded before 2023. This is entirely feasible because the Securities Law 2019 will take effect from 2021 and its guiding documents will be issued immediately this year. But what's more interesting is that the Government corrected the three laws at the same time, namely the Securities Law, the Enterprise Law and the Investment Law for consistency. This means that from now on, the development of the securities market is no longer lonely, but has the synchronization and support of the concerned ministries and agencies.
It is recognized that the two FTSE Russell's remaining unmet criteria are related to technology infrastructure. If in 2021, the Securities Commission introduces a new technology system, we would have enough facilities to deploy new services. These are all international points of interest and obstacles to be removed in 2021.
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It is possible that until the next upgrade review of FTSE Russell in September 2020, Vietnam’s securities market will still not meet the expectation of market upgrading, but I believe with the drastic direction of the Government and the actions of the Securities Commission, our securities market will soon be upgraded in 2021.
Thank you, Sir!