Vietnamese stocks continue to be on the list for consideration for upgrade.

According to FTSE Russell, Vietnam was placed on the Waiting List for Classification in September 2018 with the possibility of being reclassified to an emerging market. Vietnam has not yet met the criteria for “Delivery Cycle (DvP)” which is being assessed as “Restricted” due to market practice of conducting pre-transaction checks to ensure funds are available before making a transaction. Thus, it is obvious that the market does not have failed trades, the criterion “Delivery – costs related to failed transactions” is not assessed.

In addition, improvements to the account opening registration process are required as market practices can lead to lengthy account opening registration processes. The introduction of an effective mechanism to facilitate transactions between foreign investors trading securities that have reached or are close to the foreign ownership limit is also considered an important measure.

FTSE Russell continues to keep Vietnam on the upgrade review list (Illustration photo: KT)

FTSE Russell’s report continues to point out that the determination to move towards an emerging market upgrade has been consistently maintained since the annual review in September 2023 and was recently reaffirmed by the Prime Minister himself. On February 28, 2023, the Prime Minister specifically committed that the Vietnamese market would remove barriers that could hinder meeting FTSE’s criteria for an upgrade (to emerging market) by 2025.

The measures include amending relevant laws and regulations and facilitating and removing barriers for foreign investors to access the market. For example, the Government is currently reviewing foreign ownership ratios in various industries and simplifying the account opening process for foreign investors.

The proposed “Non-Prefunding” payment model, which is under consideration, has been adjusted, with the participation and coordination of the market members and the State Securities Commission. The Ministry of Finance issued Circular 68/2024/TT-BTC dated September 18, 2024, amending many provisions. This Circular has removed the requirement for sufficient funds before making a purchase transaction by foreign institutional investors, and updated many new regulations on securities transactions, payment and clearing, operations of securities companies, and information disclosure.

The next relevant announcement is expected to be the more detailed operating regulations of the Vietnam Securities Depository and Clearing Corporation (VSDC). FTSE Russell continues to encourage meetings and working between Vietnamese authorities and the international investment community to ensure that these regulations meet the requirements of international and domestic market participants who are the ones applying them.

“If Vietnam is to achieve the Prime Minister’s target of being upgraded by 2025, it is important that the pace of change and reform is maintained. The revised regulations need to be agreed and widely communicated, including a clear definition of the necessary roles and responsibilities in the payment model, as well as an implementation roadmap with specific milestones,” FTSE Russell noted.

FTSE Russell continues to support the Government of Vietnam on market reforms and maintains a constructive working relationship with the State Securities Commission, other regulators, and the World Bank Group - a partner supporting the market reform agenda.

Accordingly, based on the recommendations from the FTSE National Equity Market Classification Advisory Committee and the FTSE Russell Policy Advisory Board, the FTSE Russell Index Management Board has decided to maintain Vietnam on the Pending List for classification at the annual review in September 2024. FTSE will provide an update on the status of Vietnam's Pending List at the mid-term review in March 2025.

SSI Research estimates that with the upgrade to emerging markets, capital flows from ETFs could reach up to 1.7 billion USD, not including capital flows from active funds (FTSE Russell estimates total assets from active funds are 5 times higher than ETFs).

Source: https://vov.vn/thi-truong/chung-khoan/ftse-russell-chung-khoan-viet-tiep-tuc-trong-danh-sach-xem-xet-nang-hang-post1127179.vov