Deputy Prime Minister Ho Duc Phoc approved a plan on 12/9 to upgrade Vietnam's stock market. The plan aims to develop the market into a key platform for medium and long-term capital mobilization, integrating it regionally and internationally.
Vietnam's short-term goal is to upgrade from a frontier market to a secondary emerging market according to FTSE Russell by 2025. Its long-term goal, by 2030, is to achieve emerging market status with MSCI and advanced emerging market status with FTSE Russell.
To meet FTSE Russell's upgrade criteria by 2025, the plan focuses on pre-funding securities purchases. This addresses the requirement for foreign investors to deposit funds before trading when a central counterparty (CCP) mechanism isn't available. Transparency regarding foreign ownership will ensure equal access for foreign investors.
Additional solutions to maintain the rating include simplifying account opening procedures for foreign investors, increasing connectivity between custodian banks and securities companies, implementing omnibus trading accounts (OTA), stabilizing the foreign exchange market, and upgrading trading and payment infrastructure and interagency management and supervision capabilities to ensure market security and safety.
For longer-term, higher-level upgrades, regulations will be reviewed to increase foreign ownership limits and remove unnecessary restrictions. Advanced clearing and settlement infrastructure will be developed to support a trading and payment mechanism without requiring 100% pre-funding and to facilitate the CCP mechanism.
Regulated securities lending, borrowing, and short selling will be explored and implemented gradually. The government will further develop the foreign exchange market with risk mitigation tools for indirect investment activities, ensuring macroeconomic stability through coordinated fiscal and monetary policies.
The plan emphasizes enhanced coordination among regulatory bodies for monitoring foreign indirect investment flows. It also aims to modernize the trading and payment systems to handle large trading volumes, gradually apply new technologies, and refine mechanisms and policies.
Supporting solutions include increasing liquidity with new order types and trading mechanisms, developing market makers, and enhancing transparency by adopting International Financial Reporting Standards (IFRS) and OECD corporate governance standards.
Diversifying investors is also a priority. This includes encouraging individual investors to invest through professional funds and expanding market offerings with new products: infrastructure bonds, green bonds, derivatives, fund certificates, and other green financial instruments. Existing indices will be improved, and new underlying indices for the derivatives market will be developed.
Vietnam's stock market is among the fastest-growing globally. According to the Ministry of Finance, the total market capitalization reached 103.75% of the estimated 2024 GDP. As of August, the VN-Index had increased by 33% compared to the end of 2024.
Phuong Dung
