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| Circulars 03 and 20 as a coordinated policy response to persistent structural constraints in the capital market__Photo: VNA |
In a bid to enhance the attractiveness of its securities market to foreign investors, Vietnam has recently introduced two regulatory instruments: Circular 03 issued by the State Bank of Vietnam and Circular 20 promulgated by the Ministry of Finance. Industry insiders have welcomed the new provisions, describing them as timely moves that not only improve market access criteria but also boost foreign inflows and support the upgrade to emerging market status under international indices.
Circular 03 – A step toward transparent capital management
Issued by the State Bank of Vietnam, Circular 03 marks a pivotal shift in the regulatory framework governing foreign indirect investment. Effective from June 16, the circular allows foreign investors to open multiple Vietnamese-dong accounts at a licensed bank in Vietnam. These accounts, linked to their securities trading codes, will be used to conduct transactions in the country's securities market.
“This move marks a significant step forward in improving the management of capital flows and mitigating foreign exchange risks,” said Vu Duy Khanh, Director of the Analysis Center at Smart Invest Securities JSC., in a talk with thoibaotaichinh.com.
According to Khanh, the consolidation of account operations under Circular 03 will enable regulatory authorities to more effectively monitor capital inflows and outflows, reduce fragmentation in trading activities, limit speculative behavior, and prevent non-transparent capital movements. He further noted that the centralized management of foreign currency conversions through licensed banks is expected to contribute to exchange rate stability. This mechanism, he emphasized, enhances Vietnam’s ability to respond to external economic shocks and manage risks associated with financial leverage in foreign investment activities.
More broadly, Circular 03 aligns with Vietnam’s ambition to upgrade its securities market from frontier to emerging status, as defined by international rating agencies such as FTSE and MSCI. To meet the technical and institutional requirements of such an upgrade, including enhanced transparency, liquidity, and market accessibility, Vietnam must demonstrate a stable and predictable legal environment for foreign capital. Circular 03 responds directly to this need by formalizing procedures, improving oversight, and reinforcing legal safeguards around currency conversion and capital transfers.
Sharing this view, Bui Van Huy, Vice Chairman of FIDT Investment Consulting and Asset Management JSC., noted that while Circular 03 may not result in an immediate surge of capital inflows, it provides an important institutional foundation that strengthens Vietnam’s appeal to foreign institutional investors in the medium term.
Meanwhile, Bui Ngoc Trung, an expert at Mirae Asset Vietnam, added that Circular 03 strengthens foreign capital inflows by establishing a clear legal framework for effective capital routing and supervision. “The standardization of banking data enables managing agencies to better monitor risk and capital flow, and to issue early warnings of potential market volatility, an important contribution to maintaining stability amid a globally uncertain environment”, he said.
Circular 20 – Clarifying procedures, enhancing market accessibility
Complementing the reforms introduced in Circular 03, the Ministry of Finance’s Circular 20 provides clarifications that further ease foreign investors’ participation in Vietnam’s securities market. By refining operational requirements for indirect investment accounts and streamlining disclosure obligations, Circular 20 represents a targeted effort to remove procedural bottlenecks and enhance market accessibility.
In addition to simplified account procedures, the circular standardizes operations at custodian banks, including those applicable to issuers of depository receipts (DRs). It also imposes a 24-hour deadline for submitting notifications to the State Securities Commission and relevant Vietnam Stock Exchange subsidiaries regarding the appointment or replacement of individuals responsible for securities disclosures. These updates significantly reduce processing time and improve operational flexibility.
Industry analysts see the legal synchronization between Circulars 03 and 20 as a coordinated policy response to persistent structural constraints in the capital market. By addressing both the legal and operational dimensions of foreign investment, the two circulars jointly contribute to a more predictable and investor-friendly regulatory environment. In particular, they improve Vietnam’s standing in the eyes of international index providers by promoting greater transparency, streamlined compliance, and standardized information flows.
Looking ahead, this legal alignment is expected to play a pivotal role in Vietnam’s pursuit of emerging market status. When combined with the forthcoming implementation of Circular 68/2024/TT-BTC—mandating English-language disclosure of market information—the regulatory groundwork laid by Circulars 03 and 20 will offer a robust platform for sustainable foreign capital inflows and institutional market development.
Analysts at the SSI Securities Corporation estimate that once the market is upgraded, Vietnam’s securities sector could attract up to USD 1.7 billion in capital from exchange-traded funds, not to mention potentially larger inflows from active investment funds.- (VLLF)
