MSCI unveils improvements in Vietnam's stock market

MSCI unveils improvements in Vietnam's stock market

Morgan Stanley Capital International Inc. (MSCI) noted that Vietnam's stock market has seen several developments over the past year in its Global Market Accessibility Review released on June 23.

Most of MSCI's assessment of Vietnam's stock market remained the same as last year. In terms of foreign ownership limit levels, companies in certain sectors are subject to foreign ownership limits ranging from zero to 75 per cent. These limitations still affect more than 10 per cent of the Vietnamese equity market.

Regarding foreign room level, the equity market is significantly impacted by foreign room issues. More than one per cent of the MSCI Vietnam IMI index is impacted by low foreign room.

Some information is not always readily available in English. In addition, the rights of foreign investors are limited as a result of stringent foreign ownership limits.

There is no offshore currency market in Vietnam and there are constraints on the onshore currency market (e.g., foreign exchange transactions must be linked to security transactions). Registration is mandatory, and account setup requires the approval of the Vietnam Securities Depository and Clearing Corporation (VSDC).

The Ministry of Finance outlined a roadmap in September 2024 requiring public companies to disclose information in English. This will be done in phases starting January 1, 2025 and ending January 1, 2028. Additionally, in December 2024, Vietnam implemented a short-term non-pre-funding solution, which involves brokers guaranteeing settlement of trades. MSCI will monitor the implementation of these changes closely.

In terms of transferability, following changes in regulation, more types of off exchange transactions and in-kind transfers can be executed without the need for regulatory pre-approval, leading to volumes for these transactions increasing significantly. However, VSDC typically takes several days to review required documentation before these transactions can be executed.

MSCI is expected to announce the results of market classification on June 26.

VIR