Speakers at the Vietnam Investment Forum 2024 in HCM City on Thursday. VNA/VNS Photo

HCM CITY — The launch of the KRX system by the end of this year is expected to significantly increase capital flows to the stock market, experts said.

Speaking at the Vietnam Investment Forum 2024 in HCM City on Thursday, Tạ Thanh Bình, head of the Securities Market Development Department under the State Securities Commission (SSC), said the market has experienced fluctuations since the start of 2023 due to global economic and political instability.

Bình attributed the market’s decline to slower growth in major economies, concerns over geopolitical tensions in the Middle East, currency exchange rate pressures, and other factors.

Despite the market being in a downtrend since September, liquidity has gradually improved, according to Bình.

Bình also highlighted positive signs for the stock market in the near future, such as controlled inflation, falling loan interest rates, flexible monetary policy management, increased public investment capital disbursement, and government support programmes.

The upcoming launch of the KRX (Korea Exchange) system is considered a significant development for the market. The system is currently in the testing phase and is expected to become operational by the end of this year.

Its goal is to upgrade the technology system and infrastructure of the Vietnamese stock exchange.

The KRX system is expected to introduce new products, trading, and payment solutions to the Vietnamese stock market, including T+0 settlement, short selling, and option contracts. 

These innovations will help address market bottlenecks and move towards upgrading the market from frontier to emerging.

Nguyễn Duy Linh, CEO of VPBank Securities Joint Stock Company, said the SSC is actively implementing market reforms by launching the KRX system by the end of December 2023.

It also plans to streamline payment procedures for foreign investors in the stock market, allowing securities companies to provide guarantees for foreign investors when purchasing shares.

This move has been recognised by FTSE Russell, a global ratings organisation, as a step forward that may help overcome long-standing legal barriers that have hindered market upgrades.

According to Linh, Việt Nam has the potential for an early upgrade announcement from FTSE in September 2024 and an upgrade by June 2026 by global ratings organisation MSCI, based on the proactive implementation of activities related to market reforms.

The upgrade to emerging market status is expected to attract significant capital inflows to the market.

VPBank Securities estimates around US$600 million could flow in from passive funds, assuming Việt Nam’s proportion in the new emerging market index is around 0.7 per cent.

In addition, existing funds are expected to invest five times more when Việt Nam is upgraded to an emerging market, providing greater profits for listed companies on the HOSE trading floor.

Currently classified as a “frontier market” by global ratings organisations FTSE Russell and MSCI, Việt Nam needs to meet higher standards to elevate its status to an “emerging market.”

Cấn Văn Lực, chief economist at commercial Joint Stock Bank of Investment and Development of Vietnam (BIDV), said that if Việt Nam’s status is upgraded to emerging market, the stock market will attract “larger, more stable, and more diverse” capital flows from foreign investors.

The upgrade to emerging market status will also lead to institutional reforms, market improvements, and the development of businesses and financial markets, he added.

FTSE Russell’s September 2023 ranking report placed Việt Nam on a watch list for possible reclassification to secondary emerging market status. — VNS