Stock market

Securities market needs improvement to attract investment

According to Ms. Ta Thanh Binh, head of the Securities Market Development Department under the State Securities Commission, economic positive prospects this year will create great favorable conditions for Vietnam’s stock market.

Securities market needs improvement to attract investment

This year, major international organizations forecast that the world economy will continue its downward trend, of which developed economies will have a growth rate of 0.3 percent lower than last year and emerging economies will keep the same growth rate of last year of about 4.7 percent. However, Vietnam's economy is still forecast to be optimistic, with GDP up 6.6 percent to 7 percent.
Sai Gon Giai Phong Newspaper recently had an interview with Ms. Ta Thanh Binh, head of the Securities Market Development Department under the State Securities Commission (SSC).
SGGP: In your opinion, what are highlights of 2018?
Ms. Ta Thanh Binh: Last year, the Vietnam’s securities market experienced several fluctuations due to complex economic, financial and monetary situation in the world. However, the country’s securities market was still able to achieve and maintain impressive results amid the situation. By the end of 2018, the Vietnam’s benchmark VN-Index was at 892.54 points, down 9.3 percent compared to that at the end of 2017 while some securities markets in the world saw a sharp decline, including China with 24.6 percent, Germany with 18.3 percent, South Korea with 17.3 percent, Hong Kong with 14.6 percent, the UK with 12.5 percent and Japan with 12.1 percent.
Market capitalization increased 12.7 percent compared to 2017 or 71.6 percent of GDP in 2018, exceeding the Government’s target by 2020. Liquidity on the market continued to keep growth momentum with an increase of 29 percent from VND5 trillion per session in 2017 to VND6.5 trillion per session in 2018. Total capital mobilization via securities market exceeded VND278 trillion, up 14 percent compared to 2017. Through capital mobilization, firms have expanded operation and eased financial crunch.
Foreign investors continued to pour money into Vietnam’s stock market while withdrawing from regional markets, showing their confidence in development potential of the country’s securities market. Foreign capital flow on the securities market remained at high level from US$2.92 billion in 2017 to $2.75 billion in 2018. Portfolio value of foreign investors reached $32.6 billion in 2018, equivalent to the value at the end of 2017 and about over $1 billion in cash.
SGGP: At the gong-beating ceremony to open the first trading session of this year, the Prime Minister mentioned shortcomings of the Vietnam’s securities market, including poor compliance with market disciplines. What measures have the SSC taken to deal with the aforesaid shortcoming?
Ms Binh: SSC has strengthened inspection and supervision and timely dealt with violations in order to lessen profiteering and market manipulation acts. Particularly, SSC imposed administrative sanctions on 397 cases of 129 organizations and 268 individuals with total fine of VND21 billion. Of which, nine individuals were fined VND4.95 billion for market manipulating and an individual was confiscated VND149 million.
There are still issues of market manipulation and spy on the market. However, it is difficult for SSC to inspect violations as SSC does not have the power to ask organizations and individuals to provide information and summon relevant individuals for investigation. It also faces difficulties in determining the exact influence of the consequence as a base for criminal prosecution. SSC plans to add some more rights to timely detect and deal with violations when amending the Securities Law in the near future.
SGGP: The Prime Minister also pointed out that even though transparency has been improved, it is still at low level. Investors are not really professional and mainly small ones, leading to high crowd psychology and risk spreading. What has SSC done to deal with the situation?
Ms. Binh: Besides positive results, the securities market still has matters to deal with, of which transparency needs improving further. Some public companies have not been proactive in publicizing information on their operation, capital use and corporate governance situation while figures in financial statements are incorrect. Compliance with corporate governance is merely formalism instead of firms’ real desire.
The number of investors is still much lower than other countries in the region and in the world. By the end of 2018, securities investors accounted for 2.2 percent of the country’s population, much lower than 48.8 percent of the US in 2013, 29.1 percent of Singapore in 2015, 26 percent of Malaysia in 2011 and 14.6 percent of China in 2015.
Individual investors take the upper hand on the stock market while institutional investors account for a small proportion. Statistics shows that total trading value of individual investors currently accounts for nearly 75 percent of Ho Chi Minh City Stock Exchange’s total trading value. On the derivatives market, individual investors also account for more than 99 percent. In order to improve investors, SSC will promote training and provide knowledge to raise awareness for investors and help them access the market by ensuring transparency in information disclosure of listed and public firms.
As for institutional investors, SSC will supplement suitable products such as future contract of government bonds, improve professional investors via regular dialogue with market’s members, especially investment funds and depository banks, and present suitable policies. In addition, SSC will also add regulations on professional investors in the securities law amendment draft and organizations and individuals meet the requirements will have peculiar mechanism compared to other investors.
SGGP: The Prime Minister instructed the Ministry of Finance and SSC to collaborate with relevant ministries to carry out measures to upgrade the market from frontier market to emerging market. How has SSC implemented measures?
Ms. Binh: The fact that Vietnam was added onto FTSE Russell’s watch list for a possible future upwards reclassification, according to its annual country classification review published on September 29 last year, was one of the positive signs that helped lure a large amount of foreign capital into the country’s securities market.
Among criteria that have been met by Vietnam are the quality of market monitoring by formal regulators, sufficient competition to ensure high quality custodian services and market depth information/visibility and trading report process. However, Vietnam has to maintain and improve set criteria for at least one year in order to be officially reclassified.
Meanwhile according to Morgan and Stanley Capital International (MSCI), Vietnam needs to improve transparency, foreign exchange market liberalization, corporate governance and foreign ownership limits.
SSC is in the progress of resolving issues on ownership ratio so as to attract foreign indirect capital by amending the Securities Law, developing, diversifying and improving the quality of products on securities market; improve publicity and transparency on the market; ensure equality for the rights of foreign investors in accessing information; and improve corporate governance and financial statement. With these measures, Vietnam’s stock market will possibly meet MSCI’s criteria this year or next year.
SSGP: Thank you!

By Ngoc Quang – Translated by Thuy Doan

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