Vietnam moves to unlock global capital via depository receipts

Vietnam moves to unlock global capital via depository receipts

Vietnam is laying the legal groundwork for overseas depository receipts, aiming to expand international fundraising channels and boost transparency, as it moves towards emerging market status on the global financial stage.

Depository receipts are becoming an essential tool. Not just for expanding access to international capital markets, but also for helping Vietnamese businesses enhance their visibility and competitiveness on the global financial stage. At the same time, they offer global investors a more convenient gateway to Vietnamese companies.

In a seminar to discuss the innovative opportunities of depository receipts for Vietnamese stock investors on July 21 in Hanoi, Vu Chi Dung, head of the Legal and International Cooperation Department under the State Securities Commission (SSC) noted that in today’s increasingly globalised world, promoting overseas securities offerings and listings – particularly through mechanisms such as depository receipts – is no longer optional but a strategic imperative.

"Vietnam has established a solid legal foundation to develop overseas offerings and listings, including depository receipts, professionally," said Dung.

For instance, the Law on Securities 2019 provides the legal basis for Vietnamese issuers to offer securities abroad, or Circular No.119/2020/TT-BTC issued by the Ministry of Finance outlines regulations on the transfer of securities ownership in connection with the issuance or cancellation of depository receipts.

This legal framework lays the groundwork for a methodical and professional expansion of international securities offerings, including depository receipts.

"The SSC will continue to improve the regulatory framework while working closely with international financial institutions, major global stock exchanges, and industry experts to support Vietnamese businesses in their global outreach efforts," said Dung.

The goal is to ensure that the process of issuing and listing depository receipts is smooth, transparent, and effective.

Dung also highlighted that as Vietnam deepens its integration into the global economy and aims to upgrade its stock market classification from frontier to emerging, the potential for growth in this area is substantial.

According to Nguyen Quang Thuong, deputy CEO of Vietnam Exchange (VNX), Vietnam has already built the legal foundation for issuing and listing depository receipts based on Vietnamese stocks abroad.

Some initial successes have also been recorded, such as Vietnamese depository receipts have already been issued and traded on the Thai market.

"In the reverse direction, the issuance of depository receipts for foreign stocks in Vietnam still lacks a clear regulatory framework. A comprehensive legal corridor therefore is needed to implement this model, meet domestic investor demand, and diversify investment products," said Thuong.

Thuong proposed that regulators consider adding legal provisions for the issuance and listing of depository receipts leveraging foreign stocks in the Vietnamese market. He also recommended more support for training courses and specialised seminars tailored for securities firms and investors.

Also at the seminar, Bernice Tan, vice president of Securities Trading at Singapore Exchange (SGX), said that cross-listed depository receipts can leverage existing market infrastructure to facilitate liquidity connectivity across ASEAN markets.

According to Tan, "Depository receipts benefit the domestic financial ecosystem by broadening access for retail investors, intermediaries, and issuers. They also help stimulate liquidity both in the home market and in the underlying market."

"To improve investor awareness, we work through the SGX Academy and our research resources, as well as partnership with platforms that engage issuers of underlying securities for Singapore Depository Receipts (SDRs). We also host regular seminars spotlighting SDR-underlying companies," she added. "Furthermore, we utilise local media, financial platforms, and key opinion leaders to publish commentary on these underlying companies."

Looking ahead, the VNX plans to deepen its bilateral cooperation with SGX, focusing on sharing experience in developing new financial products and technologies, as well as co-launching depository receipts based on Vietnamese stocks on the Singapore market.

Globally, the depository receipt model has been effectively deployed in countries, such as the United States, the UK, and Singapore.

These tools have helped local companies access international capital markets, boost transparency, and adopt higher standards of corporate governance.

In Vietnam, although the concept of depository receipts is not entirely new, the market is still in its early development stages.

Currently, only a limited number of Vietnamese enterprises meet the criteria for issuing and listing depository receipts abroad, primarily due to limitations in scale, as well as challenges related to accounting standards, information disclosure, and access to international capital markets.

VIR