The fourth quarter has come. While it holds no surprise about the market nor
technology, the amendment of the Law could be among the most expected
Vietnam stock market’s position
FTSE Russell - a global stock index provider has just released a report acknowledging Vietnam's efforts to improve and develop the capital market, and said it would consider upgrading Vietnam stock marketto emerging markets in September 2020. Thus, before the upgrade really happens, it is necessary for some criteria which are being poorly evaluated by foreign investors to be improved. Only by this way can people expect that in one year, Vietnam stock market will reach the next “level”.
Earlier, 21 criteria used by FTSE Russell to assess stock markets in each upgrade period were reviewed by the staff of the State Securities Commission (SSC) with FTSE experts during their business trip in July 2019. Several questions from investors and credit ratingorganizations were well-answered. In addition, the goodwill expressed by FTSE at that time caused many people to expect the possibility that Vietnam stock marketwould be upgraded in September.
However, the results indicated that the assessments from foreign investors showed that they are more cautious than expected. They want to see clear and progressive changes in the country’s investment environment and evaluation criteria before making a decision to upgrade the market.
Amendment of the Securities Law
The fourth quarter has come. While it holds no surprise about the stock market nor the technology, the amendment of the Securities Law could be among the most expected things. The amendment of the Securities Law, which is projected to be considered by the National Assembly at the end of 2019, will refresh the legal basis to regulate several market activities, and decide the industry model of Vietnam stock market.
While in the past, what investors were most interested in was the possibility of a new law on room, now the public concern is that whether the stock market will be organized by 1, 2 or 3 Stock Exchanges? Currently, the Draft Law on Securities is inclined to regulate that the Vietnam stock market has only 1 Stock Exchange. However, recently, the Ministry of Finance has announced the draft of establishing Vietnam Stock Exchange with the model of 1 Parent and 2 Existing ownership (HOSE and HNX) which will be 2 Subsidiaries (!).
Macro movements may not receive the close attention of individual investors, but are the focus of professional investors' concern. The policy message in the development of Vietnam stock market, especially in loosening room, organizing markets and legal corridors that regulate capital raising of enterprises, if not transparent, may be the obstacles of Vietnam stock marketon the way to reaching the next level.
It is the fourth quarter and there are expectations that stocks of banking, information technology, retail, industrial park real estate, textile and seaport will have positive movements in the context of increasingly unpredictable business environment. No one, be it a newbie or a veteran in the field, could be 100% sure about the prospect of Vietnam stock marketin this quarter because it is delicate and always fluctuates according to objective movements.
However, the Securities Law is a whole different thing. It takes year for the Law to be revised and renewed, so the public is waiting for a new legal foundation with a consistent and long-term vision.
Regarding the maximum rate of foreign investment in the stock market, the amended Securities Law has no new points, but the revised Business Law opens new spaces for inflows of foreign capital when a joint stock company is allowed to issue a wide range of preferred stocks and gives specific provisions on NVDR products (depository certificates without voting rights). In fact, on the stock market, there are investors who are not interested in voting right at the General Meeting of Shareholders, but only interested in trading stocks to get economic benefits
Therefore, if the Law creates a unified legal foundation for entities to continue trading shares even when foreign ownership proportion has reached the limit, it will be a plus point for Vietnam stock marketon its path to become a better evaluated stock market.