Việt Nam's stock market moves closer to emerging market status amid key policy changes

During a meeting on November 4 with representatives from FTSE Russell and Morgan Stanley to discuss the upgrade of Việt Nam's stock market, Vũ Thị Chân Phương, Chairwoman of the State Securities Commission (SSC), shared updates on new initiatives being implemented by the Vietnamese government and the Ministry of Finance (MoF) aimed at enhancing foreign investment in the country's financial market and meeting emerging market reclassification criteria.

Delegates from the SSC, FTSE Russell and Morgan Stanley at the meeting on November 4. — Photo courtesy of the SSC

Phương said that Circular 68/2024/TT-BTC, issued by the Ministry of Finance (MoF) on September 18, 2024, eliminated the requirement for international investors to have sufficient funds before carrying out stock purchases.

This regulation introduced new provisions related to securities trading, payment processes, clearing operations and the activities of securities companies, as well as enhancing information disclosure requirements.

The Việt Nam Securities Depository Center (VSDC) had also rolled out new regulations concerning depository membership, the clearing and settlement of securities transactions and the registration and transfer of securities ownership at the centre.

Upon returning to Việt Nam after six months, Wanming Du, Director of Index Policy, Asia-Pacific, at FTSE Russell, was impressed by the advancements made by the regulator and the Vietnamese stock market on the very first day Circular 68 came into effect.

Du also affirmed that FTSE Russell would increase engagements with relevant stakeholders in Việt Nam to support foreign investor transactions in the country, as well as to share insights and transaction methods used by FTSE clients in other emerging markets.

Young Lee, Managing Director of Equity Business for Asia at Morgan Stanley, acknowledged that the new regulations under Circular 68 had aligned Việt Nam's stock market more closely with FTSE Russell’s essential requirements.

He pointed out that the removal of the pre-funding requirement for order placements was a crucial demand from investors. While adjustments to mechanisms and policies typically take time, he commended Việt Nam's regulatory authorities for implementing this significant change swiftly and expressed gratitude for their efforts.

Looking ahead, Lee noted that upgrading the country’s stock market to an emerging market status could attract approximately US$800 million from passive investors tracking the FTSE index and an additional $2 billion from those following other indices.

He also suggested that this upgrade could foster increased engagement from active funds, potentially resulting in an influx of $4 - 6 billion.

During the meeting, the FTSE Russell delegation and the SSC also addressed various topics, including processes for managing account shortfalls on failed buy and sell transactions, registration procedures for foreign investor assets, omnibus account mechanisms, foreign ownership limits and trading infrastructure.

Phương said that the SSC was ready to engage with FTSE Russell and Morgan Stanley through both online and in-person meetings to better address the needs of foreign investors into Việt Nam's stock market.