Opportunities and challenges in upgrading the Vietnamese stock market

At the “Motivating the Stock Market Upgrade” seminar in Hà Nội City. — Photo laodong.vn

HÀ NỘI — The elevation of Việt Nam’s stock market from frontier to emerging status brings numerous benefits but with it, also significant challenges.

Ensuring continued stable development, maintaining the upgraded status and avoiding a downgrade were key topics discussed at the “Motivating the Stock Market Upgrade” seminar held in Hà Nộion July 2.

Việt Nam’s stock market has become one of the fastest-growing in terms of size and liquidity in the region. However, it is still classified as a frontier market, while most exchange-traded funds (ETFs) pursue stocks in emerging markets.

Nguyễn Ngọc Hiển, Editor-in-Chief of Lao Động Newspaper, said Việt Nam’s stock market holds the highest weight in frontier market indices, comprising up to 29 per cent in the MSCI Frontier Markets Index and 38 per cent in the FTSE Russell Frontier Index.

Vũ Chí Dũng, Director of the International Cooperation Department at the State Securities Commission, believes the government’s continuous efforts in policy innovation and management have significantly enhanced the attractiveness of Việt Nam’s stock market over more than two decades.

“Việt Nam needs to act quickly to be reclassified as an emerging market if it aims to attract more investment from international institutional investors. Việt Nam’s stock market is currently on FTSE Russell’s watchlist for an upgrade to Secondary Emerging Market status,” Dũng added.

Drawing from South Korea’s experience in upgrading its stock market, Đinh Minh Trí, Head of Retail Client Analysis at Mirae Asset Securities (Vietnam), offered several recommendations. The first factor is improving transparency and information disclosure.

Ensuring the disclosure of information in English for large listed companies to attract international investors and making financial processes and corporate governance more transparent. Enhancing market access for foreign investors, such as simplifying registration and account opening procedures, is also essential.

Additionally, extending trading hours and improving the payment and clearing systems are necessary. This requires developing information technology systems towards modern trading to ensure safety, efficiency, and risk management.

Trí said: “Based on South Korea’s experience, Việt Nam can apply comprehensive measures to perfect its stock trading system. Most large securities companies in South Korea have implemented AI and chatbot systems to enhance customer service and support automated trading.

“AI helps analyse data and make market predictions, while chatbots assist customers with common issues and provide information quickly,”

Trần Thị Khánh Hiền, Director of Research at MB Securities, noted that alongside opportunities, listed companies face significant challenges when the market is upgraded.

The market capitalisation of listed Vietnamese companies is still relatively small, so the number of stocks meeting the MSCI Emerging Markets Index criteria is limited. According to the MSCI Frontier Markets Index, Việt Nam has the largest weight at 26 per cent, but only two Vietnamese stocks are in the top 10 by weight.

As the market opens up, external factors will increasingly impact Việt Nam’s stock market and listed stocks. Competition with investment opportunities in other markets will also intensify.

Hiền added: “Upgrading the market requires the joint efforts of many parties, not just ministries and sectors, but also market participants. Companies need to professionalise investor relations (IR) activities, ensure consistency in the frequency and quality of information provided, and diversify investor access channels.

“In fact, some international rating agencies still believe that the ability of foreign investors to access information in Việt Nam’s market is limited and needs improvement.” — VNS