Capital flows favoring developed markets have caused Vietnamese stocks and many other countries in the region to face a wave of net foreign capital withdrawal. Upgrading efforts and a stable macro foundation could be factors that make Vietnam a destination when capital flows reverse.
Important changes in the new draft
After nearly 4 months since its announcement, the Draft Circular amending and supplementing 4 circulars on transactions, registration, depository and clearing, securities company operations and information disclosure has completed collecting opinions from affected entities.
According to the announcement of the Ministry of Finance, the comments were collected and accepted, from which the final draft was built with many core changes, especially in the content related to transactions of foreign investors.
With the new regulation, foreign institutional investors can buy securities without having 100% of the money in their accounts. The specific margin ratio is decided by the securities company (SC) based on the company's own assessment of the creditworthiness of the customer.
However, the payment flowchart built on the new draft has a major change compared to the first draft. The time when investors need to have enough money in their accounts before the depository member confirms the transaction results with the Vietnam Securities Depository and Clearing Corporation (VSDC) has been moved from about 2:30 p.m. on T+1 (after 1 day of trading) to early morning on T+2. Thus, from the time when foreign organizations must have money in their accounts to the time when securities are received, the time is only a few hours.
Sharing at a workshop in early July, Mr. Bui Hoang Hai, Vice Chairman of the State Securities Commission, said that the above shortening of time is to meet more closely the Payment Cycle (DvP) criteria according to international standards.
This is also a limited criterion that FTSE Russell pointed out for the Vietnamese market, along with the criterion "Payment - costs related to failed transactions".
It is a common practice in Vietnam to check whether investors have available funds before making a transaction to ensure safety, leading to a market with no failed transactions. Therefore, the criterion “Payment - costs related to failed transactions” is not evaluated. The solution to this limitation is to allow securities companies to provide payment support to foreign institutional investors.
In terms of legal basis, the representative of the State Securities Commission stated that 95% of the draft has been completed, so the final draft after being published for comments will be submitted for promulgation and will soon take effect.
In the implementation stage, securities companies must face capital pressure to limit payment risks and upgrade their risk management systems. According to Mr. Nguyen Khac Hai, Director of SSI Securities Law and Compliance Control, the fact that most securities companies plan to increase capital in 2024 and 2025 is also a preparation step for this big game.
The problem of attracting foreign indirect investment flows
The policy, orientation and determination to solve the problem of upgrading Vietnam's securities market from a frontier market to an emerging market are obvious and have been recognized by international organizations in recent times. Many organizations with many years of leading foreign capital into the Vietnamese market also believe that upgrading could be one of the important events that make foreign funds actively disburse in advance if the prospects and progress in the upgrading roadmap are clear.
However, it is undeniable that foreign investors are still diligently net selling in the Vietnamese stock market with a value of approximately 2.3 billion USD, getting closer and closer to the record total net selling value recorded in the whole year of 2023.
Not only Vietnam, the net selling value in Thailand has soon exceeded 3 billion USD. The SET index of the Stock Exchange of Thailand fell below 1,300 points, the lowest in the past 4 years.
Money has been flowing into the US thanks to the long-term high interest rates of the USD, while the currencies of many countries have depreciated. Therefore, according to experts, it is understandable that some funds have changed their strategies to invest in markets with less risk and greater opportunities in the short term.
In addition to being affected by global capital flows, the Thai stock market is also facing political instability. The country's GDP growth this year is forecast to be below 3% - a level that the Governor of the Bank of Thailand (BOT) recently said is not enough to help the economy expand sustainably in the long term.
To revive the market, at the end of June, the Thai Ministry of Finance and the stock market regulators announced quite drastic measures, focusing on adjusting some conditions for the Thai ESG Fund, applying preferential tax rates to investors and encouraging listed companies to pay attention to ESG compliance. The policy of imposing additional personal income tax on foreign investments, effective from the beginning of the year, also encourages capital to stay in the country.
Attracting foreign investors’ indirect capital back into the stock market is not only a problem for Vietnam’s stock market. However, the stability of macroeconomic indicators despite the difficulties and fluctuations of the world and the stable business operations of listed companies will be the top factors for investors to invest.
Source: https://baodautu.vn/tang-toc-go-nut-that-cho-khoi-ngoai-d219801.html
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