13:00 | 12/08/2020 Economy
(VEN) - The 20th anniversary of Vietnam’s stock market marked in July highlighted its contribution to the process of Vietnam’s economic restructuring as a dynamic and efficient capital mobilization tool.
Speeding up the market upgrading process helps the Vietnam’s stock market attract more foreign investors
Increasing number of investors
The stock market opened its first trading session on July 28, 2000, with only two public firms, coded REE and SAM. By June 2020, there were 380 stocks on the Ho Chi Minh Stock Exchange (HoSE) with more than 2.3 million investor accounts and market capitalization of over VND2.8 quadrillion (US$120.4 billion), or 57 percent of GDP.
The maturity of Vietnam’s stock market is marked by the increasing interest of foreign investors, whose numbers are rising 10 to 15 percent annually. As of the end of 2019, there were nearly 34,000 foreign investor accounts, with nearly 21 percent of market capitalization
Vietnam’s stock market recorded the participation of foreign investors for the first time in April 2001 with a British individual investor buying 100 TMS shares. In July, 2003 the first fund management company, VFM was set up in Vietnam, marking the participation of the first professional institutional investor, starting a new form of collective investment in the market.
By the end of 2004, basic commodities were fully available on the HoSE (from stocks, bonds to investment fund certificates). At this stage, the total number of trading accounts had increased by 10 times since the launch. The HoSE drew international attention for the first time with mass listing of businesses in late 2006.
According to the State Securities Commission of Vietnam (SSC), as of June 30, 2020, the total capitalization of Vietnam's stock market reached VND5.5 trillion, the market capitalization/GDP ratio increased from 0.3 percent in 2000 to 104 percent in June 2020. Of which, the capitalization of shares market reached over VND4 million billion, equivalent to about 64.5 percent of GDP in 2019; and of the bond market reached about VND2.3 trillion, equivalent to 39 percent of GDP in 2019 (government bonds accounting for 29.18 percent and corporate bonds at 10.28 percent).
In the first half of 2020, despite the impact of the Covid-19 pandemic, the total capital mobilization for the economy through the stock market still reached about VND107 trillion. It is estimated that the stock market capitalization rate in the total assets of the financial system is currently about 30.6 percent.
Policies to attract foreign investors
In order to attract foreign investment capital, the government enabled the ownership ratio of foreign investors on Vietnam's stock market to expand according to integration commitments and international practices.
In addition, building trust among investors through information transparency was of particular interest to management agencies and market operators, which promoted investment growth in terms of both quantity and quality.
According to the Vietnam Securities Depository (VSD), as of June 2020, the number of trading accounts of domestic and foreign investors reached more than 2.54 million, of which foreign investors’ accounts numbered more than 33,850.
Despite the volatile stock markets recorded worldwide, Vietnam's stock market remains an attractive destination for foreign investors with indirect capital (FII) continuing to record net buying at a rather high level. Foreign investors are holding shares in listed companies, equivalent to 20.63 percent of market capitalization, and there are 18 companies with almost no room for foreign investors, according to financial expert Dr. Nguyen Tri Hieu.
The active participation of foreign and institutional investors in the stock market has contributed to improving the quality of corporate governance and sustainable development in enterprises.
In spite of many challenges posed by the global financial market, especially amid the current pandemic and trade conflicts, Vietnam's stock market has great development potential. In order to achieve the goals of the Stock Market Restructuring Plan for the 2020-2025 period, the government and the securities sector need more mechanisms, policies and trading products to meet demand and to access the international market. They need to find solutions to attract more foreign capital inflows by upgrading the system, clearing and settling securities transactions and speeding up the market upgrading process. As for foreign investors, they expect the government to issue new regulations regarding the maximum ownership ratio of foreign capital in Vietnamese enterprises.