Investors at a trading session on the VNDirect Stock Exchange Floor. With the potentials of Việt Nam's stock market and international integration, smart cash flow will likely pour in. — VNA/VNS Photo
HÀ NỘI — While investors tend to withdraw capital from emerging markets and frontier markets, Việt Nam is still the destination of foreign investors with foreign indirect investment (FII) in the first half of 2019 reaching US$1.28 billion.
According to Trần Văn Dũng, Chairman of the State Securities Commission (SSC), from 2016 to 2018, foreign investors have continuously been net buyers on the stock market at a relatively high level, averaging $1.98 billion per year.
Foreign investors, when investing in Việt Nam's stock market, are often interested in the growth capacity of the economy in general and stocks in particular, the market size in terms of market capitalisation as well as liquidity and foreign ownership ratio, said Phạm Lưu Hưng, Deputy Director of Investment Advisory and Analysis of Institutional Customers, SSI Securities Joint Stock Company.
“It means that they care about large-cap stocks with high potential growth and the high number of circulating stocks that foreign investors can purchase,” Hưng said.
According to SSC, Việt Nam's stock market has continuously developed in size and liquidity with the total market capitalisation value as of the end of June, 2019 reaching VNĐ4.3 quadrillion ($186 billion), equivalent to about 78 per cent of the whole country’s 2018 GDP, increasing by 11.2 per cent compared to early 2019.
After 19 years, the stock market is complete in terms of structure (stocks, bonds, derivatives) and diversification in products (stocks, bonds, fund certificates, derivatives and covered warrants).
Last year, the Vietnamese stock market was included in the watch list of the UK-based financial and business information firm FTSE Russell (FTSE) for classification review for a possible lift from a Frontier market to a Secondary Emerging one.
“Việt Nam's stock market has not only developed rapidly in quantity but also in quality,” said Dũng.
According to Dũng, the Government of Việt Nam continues to make efforts in completing the securities market development policy, attracting foreign investment capital.
The amended draft law on securities has also been submitted to the National Assembly for comments, he said.
In March 2019, Prime Minister Nguyễn Xuân Phúc approved the project "Restructuring the securities market and insurance market until 2025", aiming at a more comprehensive stock market, making it an important medium and long-term capital channel for the whole economy.
Along with the macro policies, the Government has also continued to promote equitisation and divestment of state-owned enterprises (SOEs), as well as the listing and registration of trading on the stock market.
According to Dũng, with the potential of Việt Nam's stock market and the trend of financial international integration, smart cash flow will likely pour in.
However, Hưng pointed out some difficulties in attracting foreign capital.
In the last 1-2 years, the development of the local stock market experienced unfavourable conditions such as the sluggish equitisation of state-owned enterprises.
“There are some cases where foreign investors are disappointed after suffering losses when participating in IPOs and divesting of SOEs,” Hưng said.
To attract foreign capital, the most important thing is to speed up the process of restructuring SOEs which has been very slow. Some large SOEs must be equitised in the second half of 2019, Hưng said.
Đỗ Bảo Ngọc, Deputy General Director of Việt Nam Construction Securities Joint Stock Company, said to be promoted from a frontier market to an emerging market, it is crucial to enhance the fairness and transparency of the Vietnamese stock market.
“Quality of information disclosure and accounting standards also needs to be improved,” Ngọc said. — VNS