Việt Nam makes significant progress in stock market upgrade: MSCI

Việt Nam makes significant progress in stock market upgrade: MSCI

One of the most notable advancements is allowing foreign institutional investors to trade shares without the need for pre-funded accounts.

Traders work at a securities firm transaction office. MSCI's overall evaluation of Việt Nam’s stock market largely remains unchanged from the previous year. — VNA/VNS Photo

Morgan Stanley Capital International (MSCI) recently highlighted Việt Nam’s substantial strides in its journey towards upgrading its stock market status. 

This assessment comes as part of MSCI's newly published Global Market Accessibility report, which noted several key developments in the past 12 months.

One of the most notable advancements is allowing foreign institutional investors to trade shares without the need for pre-funded accounts. 

This represents a significant shift in the market's operational framework, enabling greater foreign participation. 

MSCI also pointed out that Vietnamese securities firms are now providing payment guarantees for these transactions, a move aimed at enhancing market liquidity and accessibility.

However, MSCI's overall evaluation of Việt Nam’s stock market largely remains unchanged from the previous year. 

The firm emphasised that restrictions on foreign ownership continue to pose challenges. Companies in sensitive sectors are still subject to foreign ownership limits ranging from 0 to 75 per cent, affecting over 10 per cent of the market's total capitalisation.

The issue of foreign room is particularly pertinent, with more than 1 per cent of the MSCI Vietnam Investable Market Index impacted by low foreign ownership thresholds. 

Furthermore, the report indicated that not all corporate disclosures are adequately published in English, which limits transparency for international investors. 

Strict regulations surrounding maximum ownership ratios for foreign investors further complicate their involvement.

Việt Nam’s foreign exchange market still lacks adequate infrastructure, with domestic regulations imposing additional constraints. 

Registration processes are mandatory, and account setups require approval from the Vietnam Securities Depository and Clearing Corporation (VSDC). 

Notably, not all regulations are available in English, which can hinder foreign interest.

In terms of information disclosure, the Ministry of Finance announced in September 2024 that public companies would be required to publish information in English. This initiative is scheduled to roll out in phases, starting this year and continuing through January 1, 2028, with MSCI closely monitoring its implementation. 

On the payment and settlement front, MSCI observed that the country’s stock market lacks overdraft facilities. 

However, in December 2024, Việt Nam introduced measures to address pre-funding issues, permitting securities firms to guarantee transaction payments. MSCI will require additional time to evaluate the effectiveness of these solutions.

Recent regulatory changes have also facilitated off-exchange transactions and direct transfers without regulatory approval, significantly boosting transaction volumes in recent years. 

Nevertheless, VSDC still experiences delays in processing transaction requests, often taking several days.

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

According to BSC Research, there is potential for Việt Nam to be added to MSCI’s watch list this month, with FTSE Russell likely to announce an upgrade in September. 

BSC Research believes that Việt Nam is gradually implementing necessary reforms to achieve its upgrading goals.

Specifically, seven out of nine proposed solutions have been executed, including adjustments to foreign ownership limits and improved information transparency. 

Future plans include the implementation of an Omnibus Trading Account (OTA) before August and the operation of a Central Counterparty by 2026. 

These measures, particularly the OTA rollout by VSDC, are expected to significantly enhance foreign investors' participation in the domestic stock market. 

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