Frontier status: is Vietnam closer to an emerging market?

Created 21 May 2017
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“Vietnam is working with MSCI (Morgan Stanley Capital International) on the Vietnamese stock market upgrading. 

They have criteria and if we can satisfy the criteria, our stock market will be upgraded into an emerging market," Nguyen Son, chair of the board of directors of the Vietnam Securities Depository Center (VSD), has said.

As the Vietnamese stock market has been thriving in recent months with the VN Index growing by 10 percent in the first quarter, investors have one more reason to believe in the prospect of the stock market upgrading.

According to Son, Vietnam is working with MSCI in the upgrading. MSCI has set up many criteria, including 3-4 major criteria. 

Vietnam can satisfy criteria on the market scale, the number of businesses with capitalization value of billions of dollars and market liquidity.

Regarding the requirement on market transparency, Vietnam still needs to deal with some problems, including information exposure in English.

Vietnam has been improving the problem, guiding some businesses, especially ones in VN30 group, to help foreign investors better access information.

The government has issued a decree on corporate governance which helps shareholders and businesses’ board of directors operate more effectively. 

The openness of the market will also be a decisive factor to determine if the market can be upgraded into an emerging market. 

As for businesses operating in the fields where the state does need to set limitations, shareholders’ general meetings can make decisions on how to open to investors.

In the banking sector, the foreign portfolio investment (FPI) flow to Vietnam is strong, but there are still obstacles for the outflow. “I don’t mean the weakness in the capital flow, but there still exist obstacles,” Son said. 

Commenting about the prospect of the Vietnamese stock market upgrading, Nguyen Tri Hieu, a banking expert, said, like other experts, he is optimistic about the stock market, but ‘cautiously optimistic’.

“The VN Index increased very rapidly in 2016 and increased by 10 percent just in the first quarter of the year,” Hieu said on Bizlive.

“If this continues, I think the VN Index can reach the 740 point threshold or even higher. The capitalization value of the Vietnamese stock market had reached $72 billion by the end of 2016 and I think the figure is $100 billion now,” Hieu said.

According to Finance Plus, the VN Index closed at 716.29 points on March 6, a 10-year high. The HNX Index closed at 86.55 points. 

The market capitalization value had reached VND2.26 trillion, or 50.3 percent of GDP, the highest level since market establishment.

 

 

Source: VietNamNet

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