Vietnam stock market: Need to improve the quality of listed companies

On the sidelines of the seminar “Strategy for development of the stock market 2021-2030 – Challenges and visions” organized by the Japan International Cooperation Agency (JICA) on March 21, Mr. Kojima Kazunobu, Investment Specialist JICA Consultant/Chief Consultant, Daiwa Research Institute shared with the media some comments on prospects and recommendations for the Vietnamese stock market.

There are currently about 7 million individual investor accounts trading in the market. In your opinion, is this figure commensurate with the potential of Vietnam’s stock market and your view on the market’s future prospects?

The fact that there are currently nearly 7 million individual investors’ trading accounts in the market (equivalent to 7% of Vietnam’s population) is quite high and is a positive sign for the future of Vietnam’s stock market. However, for effective development, it is necessary to improve the liquidity of the market.

Currently, the confidence in the stock market of individual investors tends to decrease due to a number of problems arising in 2022, in addition to the obvious weakening supply-demand relationship. Therefore, I believe that the recovery of individual investors’ confidence will be the biggest driver of the market in the short term. In the long term, stock prices and liquidity will change based on the development potential of each enterprise in particular and the economy in general.

How do you assess the Vietnamese stock market at the moment?

Since the beginning of trading in 2000, the size of Vietnam’s stock market has expanded markedly. Although the relevant legal system is well established and developed, there are still some problems with the quality of listed companies and securities companies as well as the limited presence of investors. domestic organizations. Measures to improve the quality of listed companies and intermediaries (stock companies and funds) will be an important topic in the next decade.

Besides, the slow growth in the number of listed companies and fundraising activities in recent years is also a big problem to be solved. Because as we can see, while the number of individual investors in Vietnam has increased significantly from about 2 million to 7 million in the past 5 years, the number of listed companies and the percentage of floating shares liquidity can be almost unchanged.

This will not encourage long-term investment flows based on growth assessment, but investors’ money will be injected or withdrawn depending on market sentiment and events taking place in the market. . Therefore, we believe that one of the solutions is that Vietnam should apply the book-building and underwriting process in the public offering of securities, like other major stock markets in the world.

Upgrading the market to emerging market is essential to be able to attract foreign capital in a stable manner. Vietnam has offered a roadmap for upgrading for many years but has not yet achieved it. What do you think is the main issue here, are the factors that are often talked about such as the need to publish reports in English or accounting standards?

As I understand it, MSCI basically assesses the accessibility of foreign investors. That’s why I think, the basic and biggest problem for Vietnam is the Foreign Ownership Limit (FOL) ratio and the upper limit applied to foreign investors as stipulated in the Charter. company. The publication of the report in English or the accounting standard that people often talk about is only a small matter compared to FOL.

Lessons from Japan that Vietnam can apply in the process of upgrading the market?

An essential element for the effective development of the stock market, not only for Japan, is to ensure “fairness”, “efficiency” and “transparency”. This issue has also been addressed in the Objectives and Principles of IOSCO (International Organization of Securities Commissions).

From this perspective, the Vietnamese stock market needs to focus on the following contents: “improving the quality of listed companies”, “raising awareness and compliance capacity of securities companies”. , and “strengthening primary market function (listing and offering of securities)”.

Some practices from Japan and other advanced markets that I think Vietnam should consider applying include: Promoting the role of self-regulatory organizations (SROs) to upgrade intermediaries on the stock market; Strengthening the appraisal of listed companies, which integrates qualitative due diligence to improve the quality of listed companies; Apply international book-setting and underwriting standards to the public offering of securities to promote fundraising and create attractive investment opportunities for a wide range of investors, including investors. Foreign investment.

Over the past 4 years, JICA’s technical cooperation project “Strengthening capacity on improving fairness and transparency of Vietnam’s stock market” (and will continue a similar project hereafter) has been and How will it help in rebuilding the confidence of domestic investors?

I think that promoting the application of measures “market supervision”, “surveillance of securities companies”, “improve management activities of public offering and listing of securities” and “enhance awareness of investor protection” proposed by this project will help rebuild the confidence of domestic investors. In fact, the draft Strategy for Vietnam’s stock market development for the period of 2021-2030 has also integrated many solutions recommended by this project.

What opportunities and challenges will Vietnam’s stock market face in the medium term?

Most international investors have high expectations for economic growth in Vietnam and have great motivation to invest here and this is a great opportunity. But on the other hand, like I said, the regulation on FOL ratio is still maintained, so it will be difficult for foreign investors to participate in IPO (initial public offering) in the form of auction. Basically, I think that the issue of market openness and flexibility will be the biggest challenge in the medium term to the growth, development as well as increasing the presence of Vietnam’s stock market in the world. international School.

Thank you Sir.

According to Le Do/Banking Times