Nine solutions for a sustainable securities market
Since its founding 22 years ago, Vietnam’s securities market has significantly grown and constantly improved its structure as an important capital raising channel of the economy, contributing to improving the market economy institution and promoting international integration.

Since its founding 22 years ago, Vietnam’s securities market has significantly grown and constantly improved its structure as an important capital raising channel of the economy, contributing to improving the market economy institution and promoting international integration.

Development of the securities market thanks to better structure

The securities market has helped improve the structure of the financial market and created a long-term capital raising channel for development investment, contributing to stepping up the national industrialization and modernization. Over the past two decades, the securities sector has overcome numerous difficulties and challenges to record remarkable achievements.

Firstly, the securities market has created a securities market institution suitable to the development level of the country and almost up to international standards on stock market in the process of international and regional integration.

Secondly, the securities sector has established and unceasingly improved a legal framework for implementation of market mechanisms and policies, including laws, decrees, circulars, regulations and processes made to suit practical economic activities of the country and ensure uninterrupted, safe, fair, public, transparent and effective trading on, and effective operation and management of, the securities market. In 2017, in addition to the improvement of regulations on the securities market, the Ministry of Finance submitted to the Government a proposal on revision of the Securities Law under Resolution 83/NQ-CP dated August 31, 2017..

Techcombank’s representatives sounds a gong to open the first TCB stock trading session in Ho Chi Minh City Stock Exchange__Photo: My Phuong/VNA

Thirdly, the securities market has affirmed itself and become an important capital raising channel of the economy, with its total capitalization reaching VND 3,500 trillion in 2017, exceeding the target for 2020 (70 percent of GDP) set by the Government. As of May 24, 2018, the market capitalization level reached a record of VND 3,846 trillion, up by 9,4 percent compared to 2017 and equal to about 77 percent of GDP. On April 9, the VN Index reached 1,204.33 points, surpassing its 2007 peak and up by 22.4 percent from the end of 2017.

Fourthly, the securities market has actively contributed to accelerating the equitization and renewal of state enterprises. The year of 2017 saw drastic state capital divestment with a record of some VND 123 trillion, eight times higher than the divested state capital amount in 2016. The state budget revenues from state capital divestment biddings, which accounted for 73 percent of total bidding sessions on both stock exchanges, reached VND 1.9 trillion.

Fifthly, the securities market has attracted a large number of foreign and domestic investors. The net foreign investment capital inflow in 2017 recorded a historical level of VND 47,864 trillion, an eight-fold increase compared to 2016. The portfolio value of foreign investors also increased sharply due to strong net buy-in of blue chip stocks, reaching around VND 755,000 trillion by the end of 2017, up by 90 percent over 2016. In addition, the value of net indirect investment capital inflow reached over VND 66,000 trillion, doubling the 2016 figures. As of April 27, 2018, the number of investor accounts reached over 2 million, 6 percent higher than that in 2017, of which over 25,000 accounts belong to foreign investors. The proportion of the portfolio value of foreign investors remains high, reaching VND 825,000 trillion by the end of April this year.

Sixthly, the appearance of the derivatives market on August 10, 2017, has not only put the last piece on the structure of Vietnam’s securities market, but also affirmed the development level and satisfaction of essential needs of its financial market. This event marked a higher development level of the securities market, making Vietnam the fifth country in ASEAN having a derivatives market following Singapore, Malaysia, Indonesia and Thailand and the 42nd country in the world having this high-end financial market.

Seventhly, the unlisted public company market (UPCoM) grew intensively and extensively in 2017 with a capitalization size of nearly VND 678 trillion, a three-fold increase compared to the end of 2016 and three times higher than the market capitalization value of listed stocks on the Hanoi Stock Exchange. Several large-sized public companies such as the Vietnam Airlines Corporation and Vietnam National Textile and Garment Group have registered their stocks, which are worth billions of US dollars, for trading on UPCoM, contributing to raising the quality of commodities on this market.

Eighthly, the government bond market has recorded new developments in terms of depth and effectiveness of the Government’s fiscal policy administration. The total value of listed government bonds reached around VND 1,000 trillion, 7,2 percent higher than 2016’s figures and equal to 20 percent of GDP in 2017. On August 14, 2017, the Prime Minister approved in Decision 1191/QD-TTg the bond market development roadmap during 2017-2020, with a vision toward 2030, aiming to develop a stable bond market with a complete structure, increase the scale and quality of operation of the market, and diversify its products with higher and higher quality up to international standards.

Ninthly, in parallel with the deve-lopment of the securities market, inspection, supervision and enforcement activities have been effectively performed, ensuring the stability and rule of law of the market and safeguarding the legitimate rights and interests of investors. Particularly, the Ministry of Finance in 2017 issued important legal texts on supervision of the securities market, including Circular 115 guiding the surveillance of securities trading on the securities market and Circular 116 guiding the State Securities Commission’s surveillance of compliance with securities regulations by the Stock Exchanges and Vietnam Securities Depository. These legal texts have added new provisions on the market surveillance to meet the practical requirements and implement current relevant regulations.

Solutions to sustainably developing the securities market

With a view to ensuring the stability and sustainability of the securities market, further restructuring the securities market, stepping up international integration and effectively implementing international commitments and solutions to getting a higher securities market rating, the Ministry of Finance and State Securities Commission will synchronously implement the following specific solutions:

1. Further improving the legal framework and building the management and supervision capacity; completing the draft revised Securities Law for submission to the Government and National Assembly for consideration and comment at the 6th session of the 14th National Assembly in October 2018; ensuring close coordination among state management agencies in improving the legal framework and administering the securities market and conducting supervision and enforcement activities to ensure safety for the securities market.

2. Further stepping up the equitization of and capital divestment from state enterprises in association with the listing and trading registration; implementing the market establishment mechanism and introducing a corporate governance code; studying and organizing in-day trading and pending securities payment services; guiding the procedures and dossiers for listing and trading registration for transformed foreign-invested enterprises for uniform application in both stock exchanges; and intensifying the inspection and supervision of transparency of information in financial statements of public companies regarding capital use, information disclosure and corporate governance.

3. Diversifying securities products, investment linked products and structural products; introducing derivatives products being futures on a number of new indexes and government bond futures; providing covered warrants; and developing more fundamental indexes for use as underlying assets of derivatives.

4. Improving and developing the bond market; diversifying government bonds; developing the system of government bond bidding members; implementing the scheme on development of corporate bonds; finalizing plans on organization of the corporate bond market and preparations for putting this market into operation in 2018.

5. Developing and diversifying the investor base and improving the demand factor; further implementing solutions to improving the Vietnamese securities market’s ranking from frontier market to emerging market on the Morgan Stanley Capital International Inc’s rankings; ensuring coordination in organization of pension funds; developing professional investment institutions and the system of market makers; further attracting foreign investment capital inflow and foreign strategic investors.

6. Developing and building capacity for the system of market intermediary organizations; further restructuring the system of securities trading organizations toward smaller number and higher service quality ; developing the system of government bond bidding members; and raising the quality and professional ethics of securities brokers.

7. Further restructuring the securities market under Prime Minister Decision 1826/QD-TTg, focusing on restructuring the market organization, commodities, investors and intermediary organizations. The State Securities Commission is collecting opinions of ministries and sectors on the restructuring tasks during 2018-20, with orientations and vision toward 2030, to be submitted to the Government for assignment. In 2018, the plan on consolidation of two stock exchanges, development of the derivatives market and continued development of corporate bond market will be strongly implemented to create a market uplift.

Eighthly, further raising the effectiveness of the management and supervision of the securities market and strictly handling violations; starting to apply the new four securities-related crimes prescribed in the 2015 Penal Code, which was revised by Law 12/2017/QH14 and came into force on January 1 this year; implementing regular inspection and examination plans under the 2018 plans; and enhancing the coordination between related units to promptly detect and strictly handle violations on the securities market, ensuring the sustainable development of the Vietnamese securities market.

Finally, intensifying the implementation of solutions to improving the ranking of the Vietnamese securities market from a marginal market to an emerging one, focusing on increasing the investment capital scale of foreign investors through increasing the number of massively capitalized companies, facilitating capital raising by enterprises; raising the quality of corporate governance and financial statements; encouraging major listing enterprises to make financial statements and disclose information in financial statements in English up to the international standards on financial statements in order to help foreign investors evaluate Vietnamese enterprises. The market uplift depends largely on drastic direction by the Government and close coordination between the Ministry of Finance, the State Bank of Vietnam and the Ministry of Planning and Investment in ensuring the macroeconomic stability, applying more favorable mechanisms to the foreign exchange market, and further facilitating the participation of foreign investors in the securities market.- (VLLF)

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