Removing bottlenecks for investors

One of the biggest barriers that Vietnam faces in upgrading its stock market is the pre-funding requirement, forcing foreign institutional investors to deposit enough money into their accounts first. when you can place an order to buy shares. This differs from the norm in many other emerging markets, where investors can buy shares up front and pay off over a period of time (usually T+1 or T+2).

However, with Circular 68, Vietnam has officially lifted pre-funding requirements for foreign institutional investors. This not only makes the Vietnamese market more flexible, but also closer to international standards, and is the key to helping remove legal and technical barriers, thereby opening up new opportunities. A great opportunity for foreign capital to flow into Vietnam, bringing Vietnam’s stock market closer to its goal of upgrading in the near future.

Mr. Nguyen The Minh, Director of Individual Customer Analysis of Yuanta Vietnam said: “Circular 68 not only helps increase liquidity and flexibility for foreign institutional investors but also creates momentum for development. New developments for the Vietnamese stock market. This is an important step forward to meet the requirements of FTSE Russell and MSCI (Morgan Stanley Capital International) in upgrading the market.”

A report from VNDIRECT Research also shows that this new policy will have three major impacts on the market: “First, attract more foreign investors when Vietnam’s regulations approach international standards.” . Second, it is expected that more foreign capital will flow in and finally, market liquidity will improve significantly.”

In addition, according to ACB Securities Analysis Center (ACBS), the possibility of Vietnam being upgraded to a secondary emerging market by FTSE Russell in March 2025 is very high, especially when requirements barriers are high. pre-transaction funds have been removed. The report also commented that: “The application of Circular 68/2024/TT-BTC will help Vietnam closer to meeting 2 of the 9 criteria required by FTSE Russell. This is an important step in the process of upgrading the stock market.”

Ms. Katia Daude Goncalves, Country Director of IFC (International Finance Corporation), affirmed: “Vietnam is a strategic partner of ours and upgrading the stock market to emerging markets will open create many opportunities for economic development and attract international investment capital.”

Currently, according to ACBS, Vietnam has met 7/9 criteria to be upgraded to a secondary emerging market by FTSE Russell. The remaining two criteria related to the settlement cycle (DvP) and the cost of failed transactions have not yet been fully evaluated. However, with the issuance of Circular 68, Vietnam has moved closer to meeting these remaining requirements.

Increase the ability to attract foreign capital flows

Upgrading to emerging market status is not only a recognition of the level of development of the stock market but also helps attract large capital flows from international investment funds, especially ETFs and active funds.

According to SSI Research, it is estimated that capital flows from ETF funds could reach 1.7 billion USD if Vietnam is upgraded. In addition, active funds often have an asset value 5 times larger than ETF funds, showing that the potential for foreign capital to flow into Vietnam is huge when the market is recognized as an emerging market.

Besides, to upgrade, international organizations such as FTSE and MSCI evaluate the market based on the accessibility of international investors. Barriers such as requiring sufficient funds before trading have limited the flexibility of foreign investors, making it difficult for them to strongly participate in the Vietnamese market. With Circular 68, trading flexibility is significantly improved, increasing access for international investors, while bringing the Vietnamese market closer to the standards of new markets. floating.

On the other hand, removing pre-funding requirements not only attracts foreign investors but also forces Vietnamese securities companies to improve risk management capacity. Because currently, securities companies are facing a big challenge in building a more professional risk management system, especially in the context of increasing foreign cash flows.

According to VNDIRECT Research, as foreign capital flows increase, the risk of untimely payments will also increase. If foreign institutional investors do not pay promptly, securities companies may have to sell off mortgaged shares, causing sharp price fluctuations and negatively affecting the market. However, thanks to the reputation of foreign investors and long-term investment commitment, experts assess that this risk is relatively low.

On the other hand, securities companies competing to provide the best services to foreign investors also helps improve service quality and enhance market transparency. This not only helps the Vietnamese market meet the requirements of international organizations but also brings stability and sustainable development to the stock market.

However, according to experts, although FTSE Russell may not upgrade Vietnam’s stock market in the October 2024 review period, according to ACBS forecasts, Vietnam is highly likely to be added to the list. Secondary emerging market book in the March 2025 review period. If the upgrade process goes smoothly, Vietnam’s stock market will attract more capital flows from international investment funds, helping to improve liquidity and market value.

In addition, Vietnam’s upgrade to emerging market status also helps improve the position of the Vietnamese economy in the international arena. This not only facilitates listed businesses to access cheaper capital but also promotes the development of other industries in the economy. Experts say that, if the upgrade goal is achieved, Vietnam can attract about 25 billion USD in investment capital by 2030.