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Stock market upgrade: a new phase of development begins

VIETNAM, April 19 - HÀ NỘI — Upgrading the Việt Nam stock market is a turning point towards a new phase of market development, boosting scale, capital efficiency and driving economic growth, according to experts.

The stock market has always been seen as a crucial channel for capital mobilisation in the economy, Nguyễn Như Quỳnh, director of the Institute of Financial Strategy and Policy, Ministry of Finance, said at a conference themed “Solutions for upgrading the Việt Nam stock market.”

Last year, the total capital raised through the stock market exceeded VNĐ418 trillion (US$16.4 billion), up 33.5 per cent year-on-year.

As of April 12, 2024, the VN-Index reached 1,276.6 points, reflecting a 13 per cent growth from the end of 2023.

The stock market's capitalisation stood at VNĐ6.8 quadrillion, an increase of 13.8 per cent from the end of 2023. This value is equivalent to about 66.1 per cent of the estimated GDP for 2023.

Quỳnh emphasised that the upgrade of the Vietnamese stock market will be a pivotal milestone for a new phase of market development, contributing to the expansion of scale, improved efficiency in capital mobilisation and utilisation, and driving domestic economic development.

Under the Prime Minister's Decision 1726/QĐ-TTg, the approved Stock Market Development Strategy until 2030 aims to establish a stable, safe, healthy, efficient, sustainable and integrated stock market.

The strategy aims to achieve stock market capitalisation equivalent to 100 per cent of GDP by 2025 and 120 per cent of GDP by 2030. The goal is to upgrade Việt Nam's stock market from a frontier market to an emerging market by 2025, following international classification standards.

During a recent conference on stock market development, the PM instructed the Ministry of Finance, the State Securities Commission (SSC), the State Bank of Vietnam (SBV) and the Ministry of Planning and Investment to swiftly address any obstacles within their respective domains to meet the criteria for the market upgrade.

The objective of upgrading the stock market has also been highlighted in the Prime Minister's directives for promoting the safe, transparent, efficient, and sustainable development of the stock market, as well as in government resolutions regarding the development of a secure, transparent and efficient capital market.

Upgrading the stock market is an important process that involves multiple ministries and sectors. The market upgrade also necessitates changes in related policies and regulations. Therefore, the conference aims to analyse the opportunities and challenges of the market upgrade and its impact on the Vietnamese economy, said Quỳnh.

Andrea Coppola, World Bank lead economist for Việt Nam, also stated that Việt Nam is currently classified as a frontier market by international index providers such as MSCI and FTSE Russell. As the largest component in frontier market indices, the country has fully capitalised on this position.

Since September 2018, Việt Nam has been included in the watchlist for potential promotion to an emerging market by FTSE Russell.

"The market upgrade will significantly elevate Việt Nam’s market position, granting full access to foreign investors with substantial capital and sufficient liquidity, making it comparable to many developing countries at a similar growth stage. The World Bank estimates that a successful stock market upgrade could attract up to $25 billion in new investments from international investors by 2030," Coppola added.

Similarly, Arabella Bennett, second secretary at the Australian Embassy in Việt Nam, said that the country has made significant progress towards its goal of upgrading to an emerging market, despite encountering challenges.

She highlighted the beneficial impact of the stock market upgrade on attracting foreign capital to support Viêt Nam and drive its economic growth. She stated that Việt Nam has the potential to mobilise up to $25 billion by 2030, positioning the country as a shining beacon in the region.

Vũ Thị Chân Phương, chairwoman of SSC, affirmed that the upgrade will solidify the market's position, enhance its reputation, positively impact market liquidity and improve market quality to align better with international standards.

The leader of SSC also stated that the market upgrade depends on the objective assessment of international rating agencies and requires the participation and determination of relevant ministries and sectors under the guidance of the Government and the PM. — VNS

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