December 11, 2018 06:18

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Where is Vietnam on the upgrade of securities market?

08:40 | 18/04/2018

VCN- Currently, 5 Vietnam’s shares meet the requirements of MSCI (the prestige provider of analytical tools of financial market and development of reference index for stocks and bonds investors to evaluate performance). Accordingly, Vietnam may be added to the Emerging Markets Indexes if it is upgraded.  

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where is vietnam on the upgrade of securities market

The size of Vietnam securities market compared to the neighboring markets. Source: Bloomberg, World Bank

As of the end of the first quarter 2018, the size of Vietnam securities market sharply increased and reached US$ 191 billion, equivalent to 95% of the GDP in 2016 and up +24.75 compared to the end of 2017.

The market liquidity also increased sharply, reaching an average of VND8,800 billion/ session in the first quarter in 2018, up + 80% compared to the average level 2017.

Mr. Nguyen Duc Hung Linh, Director of Retail Research and Investment Advisory of Saigon Securities Inc. (SSI) said that Vietnam basically satisfied the quantitative conditions related to market and transaction size. The quantitative conditions were the last barriers for the MSCI as well as the other organizations classifying market such as FTSE and S&P to consider the upgrading. In which, the technological and infrastructure platforms have gradually improved with the efforts of market management agencies.

“We realize that nine more shares can satisfy these conditions in the near future. These shares have a high capitalization value of more than US $ 2 billion and have good liquidity, but have not met the requirements on free-float capitalization value due to the low free-float rate. In the future, the State’s divestment plans will be promoted, these 9 shares will be the potential selection for MSCI to list on of EM indexes,” Mr. Linh said.

The launch of derivative market which has provided tools to investors to prevent risks is one of the conditions contributing to upgrading Vietnams’ stock market.

In addition, the conditions contribute to upgrading Vietnams’ stock market is the release of information in English. Although this is not a major obstacle, this should be done early to create equality with foreign investors.

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In the most favorable scenario, Vietnam can be upgraded to Emerging Markets by 2020, but it would take at least one year for MSCI to seek consultation and evaluation from the international investment community, and one more year for investment funds to prepare for changes and restructuring of the investment portfolio.

Under the schedules, next June is the time when MSCI will announce the results of annual evaluation and classification of market, and prepare the list of markets that need to be consulted for the next session.

By Huong Giang/Ngoc Loan