Thursday, February 22 2018

VietNamNews

Emerging market status a no-go in 2018

Update: January, 29/2018 - 09:00
It remains impossible for Việt Nam’s securities market to get promoted from a frontier market to an emerging market this year. — Photo tinnhanhchungkhoan.vn

HÀ NỘI — It remains impossible for Việt Nam’s securities market to get promoted from a frontier market to an emerging market this year, officials say.

Saigon Securities Incorporation chairman Nguyễn Duy Hưng told the recent year-end meeting held by the State Securities Commission (SSC) that the upgrading of Việt Nam’s status would boost the confidence of both domestic and foreign investors in the local market.

SSC should make a list of requirements that must be met for the Vietnamese market to get promoted. Then market regulators, Government agencies and securities companies must work together to realise those targets, he said.

“If those targets are reached, Việt Nam’s securities market will get a lift. Then the local market will become more attractive and promising to investors, especially foreign ones,” Hưng said.

However, SSC chairman Trần Văn Dũng warned that investors should not think the Vietnamese market would be promoted soon as the local market had not met international standards.

In its 2017 market classification review that was carried out in late June, Morgan Stanley Capital International Inc (MSCI), the US independent provider of research-driven insights and tools for institutional investors, did not include Việt Nam in the MSCI review list for a potential reclassification to Emerging Markets status.

Thus, Việt Nam remained in the MSCI Frontier Markets Index and the decision had been widely forecast by several local brokerage firms.

There were several major factors that led to the result, including the lack of openness to foreign investors, few English-language issuances of information disclosures made by local companies and problems with the trading mechanism, according to local securities companies.

“The SSC hopes MSCI will include Việt Nam in its reclassification review list for the status promotion in 2018 and 2019. However, we have to wait one more year until the final decision is made,” Dũng said.

Unrealistic T+0 settlement time

One of the issues that brokerage firms expect the SSC to improve in the near future is a trading mechanism that will reduce the settlement time for securities transactions from two days (T+2) to intraday (T+0).

It means the investors would be able to receive an amount of securities after they purchase it and sell it on the same day instead of waiting for two more days to receive and sell that amount of securities.

Previously on January 1, 2016, the SSC shortened settlement time for securities transactions from three days (T+3) to two days (T+2).

According to VNDirect Securities Company general director Nguyễn Hoàng Giang, the intraday settlement mechanism (T+0) could help financial companies improve their risk management and the quality of the market trading could improve.

However, SSC chairman Dũng said that his agency is working with the Vietnam Securities Depository on the issue but they find it hard to do so due to technical problems.

Việt Nam is using the T+2 settlement mechanism but the real time is T+2.5 as investors will receive the amount of securities at the end of the second day after they purchase the assets, he said.

“The standard settlement time for the global markets is still T+3, even in big markets like Japan. That proves shortening the settlement time, even just by one day, is very challenging,” Dũng said. — VNS

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