Illustrative image (Source: internet)
Hanoi (VNA) -Vietnam’s securities market has plenty of opportunities to be promoted from afrontier market to an emerging market this year.
In June last year, Vietnam’sequity market failed to be added to Morgan Stanley Capital International’s(MSCI) watch list – the US independent provider of research-driven insights andtools for institutional investors, for classification review for a possiblelift from a frontier market to an emerging one.
However, according to the latestreport released by the State Securities Commission (SSC), Vietnam almost meetsMSCI’s quantitative requirements to be added onto its watch list for a possiblefuture upwards reclassification.
The country has seven stocks thathave satisfied MSCI’s quantitative requirements in terms of market size andliquidity.
Vietnam has 22 stocks that meetMSCI’s requirement in capitalisation of 1.59 billion USD, including the AsiaCommercial Bank (ACB), dairy firm Vinamilk (VNM), real estate developerVingroup (VIC), consumer staple Masan Group (MSN) and steel maker Hoa PhatGroup (HPG).
Regarding capitalisation of thecirculating stocks, MSCI set out a standard of 797 shares for the emergingmarket. Vietnam has 16 enterprises that meet the standard, including ACB,Saigon Hanoi Commercial Joint Stock Bank (SHB), ceramic firm ViglaceraCorporation (VGC), PetroVietnam Technical Services Corporation (PVS), Vinamilk(VNM), Vingroup (VIC), Masan (MSN) and Hoa Phat (HPG).
Vietnam has 276 enterprises thathave stock liquidity equal to 15 percent of ATVR (Annualised Traded ValueRatio), which is also a criterion MSCI sets out for an emerging market.
Essentially, Vietnam’s securitiesmarket had satisfied MSCI’s quantitative requirements in terms of market sizeand liquidity, SSC said.
However, it was the qualitativecondition that is the decisive factor for an upgrade, not only by MSCI but alsoby other classification firms, such as FTSE and S&P, it added.
According to Bao Viet SecuritiesCo (BVSC), regarding Vietnam’s stock market, MSCI recognised an improvement forthe “investor registration and account set up” criterion, while maintaining theassessment for all remaining criteria (including nine requirements forimprovement).
“In general, from our view, theresults of the MSCI review indicate slow improvement in Vietnam’s stock market.Even in comparison to the two frontier markets in the region which areBangladesh and Sri Lanka, Vietnam still needs to improve the most,” BVSC saidin a recent report.
According to SSC, there wereseveral major factors that led to the result, including the lack of openness toforeign investors, few English-language issuance of information disclosuresmade by local companies and problems with the trading mechanism.
Although the direction of foreigncapital inflow is becoming increasingly unpredictable in 2018 due to manyexternal factors, experts say that Vietnam is still an attractive destinationfor foreign investors.
Last year, a wave of foreigninvestors’ capital was withdrawn from emerging markets to shift towards the USmarket due to the increasing attractiveness of the US dollar but Vietnam faceda somewhat better situation than its counterparts such as Indonesia, Thailandand the Philippines.
Dominic Scriven, Chairman of fundmanagement company Dragon Capital, cited a recent survey indicating that inthe first half of last year, foreign investors withdrew 5.6 billion USD fromthe Thai market, 3.7 billion USD from Indonesia and 1.6 billion USD from thePhilippines.
Meanwhile, according to data fromVietcombank Securities Company (VCBS), foreign investors still net boughtnearly 1.8 billion USD on the Vietnamese stock market.
According to VCBS, regardless ofthe general withdrawal trend of foreign capital in emerging markets, cash flowfrom countries such as Japan and the Republic of Korea into Vietnam was still trendingupwards.
In its annual countryclassification review published late September last year, the UK-basedfinancial and business information firm FTSE Russell (FTSE) said Vietnam “iscurrently classified as a Frontier market and is being added to the watch listfor possible reclassification as Secondary Emerging market.”
Therefore, according to VietDragon Securities Corporation, Vietnam’s market may be upgraded to the emergingmarket status by FTSE in 2020 as it requires at least one year for FTSE to seekadvice from the international investment community and another year forinvestment firms to prepare for the changes and portfolio restructuring.
Following the upgrade, a wave ofpassive capital (investment that tracks a market-weighted index or portfolio)of 300 million USD will be poured in to the Vietnamese market, VDSC forecast.
The new amended draft law onsecurities, supposed to be submitted to the Government in the second quarter of2019 and submitted to the National Assembly for consideration and approval inthe fourth quarter of 2019, was also expected to help bolster the reviewprocess for the Vietnamese market, it added.- VNS/VNA
VNA
