The Ministry of Finance has just issued Circular 68/2024/TT-BTC amending and supplementing a number of articles of the Circulars regulating securities transactions on the securities trading system; clearing and settlement of securities transactions; activities of securities companies and information disclosure on the stock market.
This is considered a drastic action by the management agency in gradually removing obstacles related to the goal of upgrading Vietnamese securities to an emerging market.
Accordingly, from November 2, 2024, foreign institutional investors are allowed to buy shares without requiring sufficient funds when placing orders (Non Pre-funding). Investors can buy securities on the same day (T+0) and pay on the following days (T+1/T+2). At the same time, Circular 68/2024/TT-BTC also stipulates the roadmap for periodic and irregular information disclosure in English based on the scale of listed companies and public companies from January 1, 2025 to January 1, 2028.
Experts from Mirae Asset Securities Vietnam Joint Stock Company stated that the Non Pre-funding policy not only helps reduce financial costs and increase flexibility for investors, but is also an important criterion to upgrade the Vietnamese market to emerging market status according to FTSE Russell standards.
According to FTSE's March 2024 assessment, Vietnam is currently on the watch list for upgrading to Secondary Emerging since September 2018. However, due to the impact of the COVID-19 pandemic, as well as some inadequate criteria, the target has not been achieved.
Currently, Vietnam is still on the watch list as a frontier market and is expected to be reclassified to Secondary Emerging. The reassessment will be carried out by FTSE in early October 2024 and in two periods in 2025, in March and September.
In the March 2024 review by FTSE, Vietnam still has limited criteria to upgrade the market, removing obstacles from pre-transaction margin requirements, as well as improving the process of opening new accounts will expect many positive changes, which are supporting factors to realize the emerging market status.
As of September 17, 2024, the market capitalization of the VN-Index reached more than 213 billion USD, quite similar to several countries with low weighting in the FTSE Emerging markets Index. For example, the market capitalization of Chile reached 170 billion USD (June 2024). Mirae Asset Vietnam estimates that Vietnam's weight in the basket will be around 0.6% when officially added.
A typical example is the Vanguard FTSE Emerging Markets ETF with a scale of nearly 79 billion USD. With an allocation ratio of 0.6%, Vietnam can be disbursed at about 474 million USD. In addition, foreign money flowing into Vietnam not only comes from funds using the FTSE Emerging Markets Index as a reference, but also other funds when the market is upgraded.
According to the Mirae Asset analysis team, most markets 1-2 years before the official upgrade, the stock market showed signs of recovery. Specifically, Qatar increased by more than 45% (September 2013 - September 2014), Saudi Arabia increased by more than 23% (March 2017 - March 2018), Romania increased by more than 18% from (September 2018 - September 2019).
Mr. Tran Duc Anh, Director of Macro and Investment Strategy at KB Securities Vietnam Joint Stock Company (KBSV), said that the Non Pre-funding policy will help the Vietnamese stock market move closer to its goal of being upgraded to a secondary emerging market according to FTSE Russell standards. It is expected that Vietnam will be officially upgraded in the March 2025 or September 2025 review period.
If approved by FTSE Russell to join the Secondary Emerging Market group, KBSV estimates that the proportion of the Vietnamese market will be around 0.7 - 1% in the FTSE Emerging Index basket. This could attract from 800 million - 1 billion USD of new investment capital from ETF funds.
More importantly, stock market upgrades are often accompanied by increased transparency and regulatory processes, creating a safer and more trustworthy investment environment.
According to Mr. Ketut Ariadi Kusuma, senior financial sector specialist of the World Bank (WB), many foreign investors are interested and expect to invest in the Vietnamese stock market, due to its high economic growth. However, because Vietnam is still a frontier market, while international institutional investors usually only invest in emerging markets or developed markets.
Therefore, Vietnam's recent reforms in removing pre-trade margin requirements, improving equity supply under foreign ownership limits, and improving access to information are important to move towards emerging market status.
The World Bank estimates that if Vietnam’s stock market is upgraded to emerging market status by MSCI and FTSE Russell, a net inflow of $5 billion will flow into Vietnam’s stock market, as global emerging market portfolios are reallocated to Vietnam after the upgrade. The inflow could even reach $25 billion by 2030, if strong reforms continue and the global investment environment remains healthy.
However, according to Mr. Tran Duc Anh, Director of Macro and Investment Strategy at KBSV, at present, this policy will not have too much impact on the reversal of foreign capital flows, because the main attractive factor for foreign investors is that Vietnam is upgraded to an emerging market by MSCI, if considered based on the scale of funds monitoring the two indexes.
“However, combined with other factors such as the Fed's interest rate cut (which helps positive cash flow into emerging markets including Vietnam) and the valuation of the Vietnamese stock market is still at a relatively attractive level. Foreign capital flows are therefore expected to trade more balanced in the final months of the year and may return to net buying in a positive scenario,” said Mr. Tran Duc Anh.
According to KBSV, the securities industry will be the first group to benefit from Non Pre-funding. However, this information has been reflected in prices up to the present time. Moreover, the level of reflection on business results will not be too large in the beginning because transaction fees from foreign investors account for a very small proportion in most securities companies. However, in the long term, the application of pre-funding and the story of upgrading will certainly bring positive impacts to businesses in the industry.
In addition, some securities companies also expect stocks in the current FTSE portfolio to benefit if the upgrade is successful. Such as HPG, VIC, VNM, VCB, SSI...
According to VNA
Source: https://doanhnghiepvn.vn/kinh-te/them-chinh-sach-giup-chung-khoan-viet-tien-gan-den-muc-tieu-nang-hang/20240920071834022
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