FTSE Russell: Need to maintain pace if it wants to hit 2025 stock market upgrade target
FTSE Russell noted the Vietnamese government’s continued support for changes in the stock market, while stressing that the pace of change must be maintained if Vietnam is to meet its 2025 target deadline.
On October 8, FTSE Russell - one of the three major organizations in market ranking - announced the 2024 stock market classification report. Periodically every half year, this is the Annual Update after the report published in March this year.
As expected by the market, the FTSE Russell index management board has decided to keep Vietnam on the watchlist after 6 years on this list. Vietnam is currently classified as a frontier market and was added to the watchlist in September 2018 so that it can be reclassified as a secondary emerging market.
According to the report, the Vietnamese stock market has not yet met the “Delivery Process (DvP)” criterion, which is currently ranked as “Limited” because the market does not conduct checks to ensure the availability of funds before executing a transaction. Therefore, the market does not encounter unsuccessful transactions. As a result, the criterion “Delivery - costs associated with unsuccessful transactions” is not ranked.
Another issue raised this time was the account registration process. “The process for registering new accounts needs to be improved as market practices can lead to lengthy registration processes,” the organization said. In addition, FTSE Russell also considered it “important” to put in place an effective mechanism to facilitate transactions between foreign investors in securities that have reached or are approaching the maximum foreign ownership ratio.
In this report, FTSE Russell also mentioned the “Non-Prefunding” (NPF) payment model - a solution to remove the bottleneck of upgrading that the State Securities Commission (SSC) has focused on implementing recently.
“The Ministry of Finance issued Circular 68/2024/TT-BTC, dated 18 September 2024, outlining amendments to a number of regulations. This Circular removes the pre-payment requirement for foreign institutional investors to purchase shares, by updating a number of regulations governing securities trading, clearing and settlement of transactions, securities company operations, and information disclosure. FTSE Russell expects the next relevant announcement to be on the publication of more detailed operating rules for the Vietnam Securities Depository and Clearing Corporation (VSDC). The organisation continues to encourage meetings between Vietnam and the international investment community, to ensure these rules meet the needs of stakeholders.
FTSE Russell acknowledges the Vietnamese government’s continued support for changes in the stock market and continues to value the constructive relationship with the SSC, other market bodies and the World Bank.
“The pace of change will need to be maintained if Vietnam is to meet the 2025 target date set by the Prime Minister earlier this year. The revised market rules need to be confirmed and communicated relatively early and widely, including the finalisation of mandatory roles and responsibilities in the ‘Non-Prefunding’ payment model, along with a roadmap, milestones and clear direction for implementation,” FTSE Russell also stressed .
The decision to keep Vietnam’s stock market on the watch list was expected, as regulatory changes in the market take time to show their impact on the market. Previously, Vietnam’s stock market was also unable to surprise in the MSCI Global Market Accessibility Assessment Report 2024 published in June 2024.
However, it is worth noting that, unlike in 2023, MSCI assessed that Vietnam has improved its transferability rating, moving from “needs improvement” to “no major problems”. Specifically, Vietnam has improved its transferability thanks to the increase in off-exchange transactions and in-kind transfers from regulatory changes. After reducing 1 criterion, there are only 8 criteria that the Vietnamese stock market has not met, including foreign ownership limits, foreign “room”, equal rights for foreign investors, freedom of the foreign exchange market, investor registration and account establishment, market regulations, information flow and clearing.
Source: https://baodautu.vn/ftse-russell-can-duy-tri-toc-do-neu-muon-can-dich-muc-tieu-nang-hang-thi-truong-chung-khoan-nam-2025-d226950.html
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