Upgrade in the offing for Vietnam’s stock market

12:46 | 11/05/2018 Finance - Banking

(VEN) - The Vietnamese stock market has grown sharply since the beginning of the year, with capitalization mainly focusing on the finance-banking sector and real estate. With strong growth of its indexes, the Vietnamese stock market stands a chance of being upgraded to the status of an emerging market by international ranking bodies in June 2018.

upgrade in the offing for vietnams stock market

Three international organizations provide market assessments of the Vietnamese bourse, including MSCI (Morgan Stanley Capital International), FTSE Russell and S&P Dow Jones. Criteria for consideration include the level of economic development, political stability, market size and liquidity, market performance, market access of foreign investors, and capital circulation.

All three divide markets into three grades - developed, emerging and frontier status. These rankings help investors determine their investment strategy and capital allocation for each type of market. Vietnam is now in the frontier status and missed an opportunity to be upgraded to emerging market status during the 2017 market classification review.

With the sharp price increases in 2017 and the strong start to 2018, coupled with the lifting of the foreign ownership ceilings and accelerated state divestment from state-owned enterprises, Vietnam now can satisfy the requirements in terms of market size and liquidity. The VN-Index has increased to close at 1,200 points, while the VN30 has increased by 14.1 percent, of which 28.2 percent increase has been reported for bank shares, 21.7 percent for real estate and 19.3 percent for financial services.

Vietnam now has more than three companies with capital of US$1.27 billion and more, transferable capitalization value of US$635 million and more, and stock liquidity equal to 15 percent of annualized traded value ratio (ATVR). This means that the number of companies satisfying the MSCI standards is higher than required.

The price increase of shares with big capitalization values such as banking, securities, insurance and real estate, increases the prospects of an upgrade for the Vietnamese stock market.

Thanks to well-controlled inflation and exchange rates, abundant foreign exchange reserves, strong increases in foreign capital, favorable circulation of domestic cash flows, and good business results, the Vietnamese stock market is expected to achieve better growth in 2018.

The State Securities Commission will continue to improve the legal framework with a focus on amending the Law on Securities, and promoting equitization and divestment of state-owned enterprises in association with listing and registration for trading. It also plans to develop and deploy new products, complete the bond market, restructure the market organization, infrastructure and technology, strengthen management and supervision of market operations, and strictly sanction violations in order to create sustainable stock market development.

Thanh Thanh