Need to maintain the pace of change for the goal of upgrading the market
Vietnam needs to continue to maintain the current pace of change if it wants to achieve its upgrade target by 2025, according to FTSE Russell.
FTSE Russell has not yet upgraded the Vietnam stock market according to newly announced information. At the same time, this organisation believes that Vietnam needs to continue to maintain the current pace of change if it wants to achieve the goal of upgrading by 2025.
In FTSE Russell's October 2024 market ranking report, Vietnam is still on the watch list to upgrade to a second emerging market (Secondary Emerging Market).
Accordingly, FTSE Russell maintains its assessments on the criteria "Dettlement cycle (DvP)" (the "Limited" level), the new account registration process, and the facilitation of trading activities between foreign investors in stocks that have exhausted room or are about to run out of foreign room.
Positive momentum of change
Notably, FTSE Russell said the non-prefunding payment model (NPF - Non prefunding) has been further refined through the process of exchange and work between a group of industry representatives and the House Securities Commission Vietnam (SSC).
Recently, the Ministry of Finance issued Circular 68 with amendments to many regulations. This Circular eliminates the advance deposit requirement for international investors, by updating regulations on securities trading, transaction clearing, securities company operations and information disclosure.
FTSE Russell said that the next important announcement is expected to be the announcement of more detailed operating rules by the Vietnam Securities Depository and Clearing Corporation (VSDC). At the same time, continue to encourage exchanges between Vietnamese entities and the international investment community, to ensure these rules meet the needs of stakeholders.
In particular, this market rating organisation emphasized that maintaining the pace of change is still mandatory if Vietnam wants to meet the 2025 target deadline set by the Prime Minister earlier this year.
The revised market rules need to be confirmed and communicated widely, relatively soon, including finalizing the required roles and responsibilities in the payments model and a roadmap, with key milestones, outlining the path towards implementation.
FTSE Russell also acknowledged the Government of Vietnam's continued support for market reforms and appreciated the constructive engagement with the SSC, other market regulators and the World Bank Group, which are supporting the broader market reform agenda.
Therefore, following recommendations received from the FTSE National Stock Classification Advisory Committee and the FTSE Russell Policy Advisory Board, the FTSE Russell Index Board has decided to keep Vietnam on the Watch List as part of the September 2024 Annual Update.
Expectations for upgraded capital flows
According to preliminary estimates from SSI Securities, with the upgrade to emerging markets, capital flows from ETFs could reach 1.7 billion USD, not including capital flows from active funds (FTSE Russell estimates total assets from active funds are 5 times higher than ETFs).
Meanwhile, ACB Securities (ACBS) believes that upgrading to emerging market will be a significant milestone for Vietnam's stock market to be recognized as a market with investment accessibility for foreign investors.
It is expected that the proportion of Vietnamese stocks will account for about 0.7-0.9% of FTSE's secondary emerging market portfolio and Vietnam will attract capital flows of 500-600 million USD from index-simulating ETFs, not to mention capital flows from active funds.
ACBS expects FTSE to add Vietnam to the list of secondary emerging markets as early as the March 2025 review period.
A study from CFA Institute has shown that when a market is upgraded from frontier to emerging, the major index increases an average of 23.2% from the announcement date to the effective date.
Estimates from the World Bank also show that upgrading to an emerging market can bring an additional 10 billion USD of new indirect investment to Vietnam, of which the first year alone can receive an additional 2 - 5 billion USD.
Source: TheLeader — theleader.vn. The article is reposted for the purpose of sharing knowledge for the founder and investor community in the ecosystem HCM VIF.