The Ministry of Finance (MoF) is on the cusp of a significant development in the evolution of Vietnam’s stock market. Soon, it will publish a comprehensive draft circular that amends and supplements four critical circulars related to transactions, registration, depository, and clearing. This action aims to align Vietnam’s regulations with international standards, a necessary step towards upgrading the stock market. As we stand in 2025, the implications of these changes are pivotal for Vietnam’s financial landscape.
Fulfilling the criteria for an upgrade is not just about ticking boxes. The amendments in question are crucial for addressing the remaining two criteria in the nine prescribed by FTSE Russell for upgrade assessment. These touch on prefunding for foreign investors and mechanisms to handle failed trades—two touchpoints essential for a robust and internationally recognized market.
Do Bao Ngoc, deputy CEO of CSI Vietnam Construction Securities, has highlighted the optimism surrounding this overhaul. He believes that these changes will enhance Vietnam’s likelihood of receiving a favorable evaluation in FTSE’s market assessment reports, particularly with deadlines approaching in September this year and March 2025. The target is to officially achieve FTSE standards by 2025—a milestone that has been anticipated since Vietnam was placed on FTSE’s watchlist in September 2018.
Under the proposed framework, the depository bank for foreign institutional investors will bear responsibility for any discrepancies in cash balance confirmations made with securities companies. This ensures that investors can engage in transactions without facing immediate setbacks due to technical issues. Additionally, the draft allows securities companies to accept purchase orders from foreign institutional investors even when their accounts lack the full value of the order. This flexibility is intended to encourage foreign investment, a cornerstone for market upgrade.
Upgrading the stock market sends a clear signal of Vietnam’s commitment to integration in the global economy. Vu Chi Dung, director general of the International Cooperation Department at the State Securities Commission (SSC), emphasizes that an upgrade would enhance not just the stock market’s image but also that of the entire Vietnamese economy. A more favorable perception among international investors could support the nation’s objective of gradually improving its credit rating by 2030.
In early July, the SSC organized a workshop titled “Creating Momentum for Stock Market Upgrading,” focusing on the challenges and solutions related to legal frameworks and necessary reformations for sustainable market growth. Various stakeholders, including stock exchanges, securities firms, listed companies, and financial experts, took part in this discussion, demonstrating a collaborative spirit in addressing bottlenecks.
The business community has expressed appreciation for these regulatory efforts, particularly concerning the improvement of legal structures. Meeting the essential criteria related to prefunding and transparency paves the way for achieving the upgrade goal by 2025. Tran Minh Hoang, director of Research and Analysis at Vietcombank Securities Company, noted that while the more challenging criteria—trading volume—are already being met, hurdles related to legal frameworks and transparency must be navigated.
Deputy Minister of Finance Nguyen Duc Chi underscored the importance of transparency, positioning it as a foundation for the substantial and long-term upgrade of Vietnam’s stock market. He suggested that providing accurate information should be seen as a fundamental responsibility of enterprises, which also brings benefits. Enhanced regulations related to information disclosure are on the roadmap for improvement, emphasizing bilingual disclosure to cater to foreign investors.
Looking forward, an upgrade would mean not just passive funds streaming into the market but also active investments from global financial players. Experts anticipate that increased participation from institutional investors will broaden the investor base and provide new capital sources crucial for ambitious goals like the equitization of major state-owned enterprises.
The ultimate goal for many stakeholders is an expanding stock market that serves as an attractive venue for raising capital—especially for innovative startups and small- to medium-sized enterprises. This would support initial public offerings (IPOs) and listing activities for larger unlisted entities, enhancing overall market attractiveness.
Yet, amid these promising prospects, challenges loom. Ensuring the stock market develops stably and sustainably post-upgrade is paramount in avoiding potential downgrades. Bui Hoang Hai, deputy chairman of the SSC, cautioned that a failure to maintain upgraded status could result in a drain of capital. The dynamic nature of rating agencies’ criteria serves as an ongoing reminder of the need for compliance.
In conclusion, the road to upgrading Vietnam’s stock market in 2025 is paved with opportunity but also fraught with challenge. With critical amendments in the pipeline and a concerted effort by stakeholders, Vietnam is poised to enhance its position in the international financial arena. The journey not only aims at compliance with global standards but also seeks to build an investment environment that reflects transparency, stability, and growth—qualities that will ultimately foster a thriving economy able to harness the full potential of its market.
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