Vietnam's Financial Reforms Aim for Emerging Market Status
Country plans to implement a central counterparty mechanism and enhance investment attractiveness by 2027.
HANOI - Vietnam is set to officially launch a central counterparty (CCP) mechanism in early 2027 as part of its strategy to be reclassified as an emerging market, a change that could take place as soon as this year.
The initiative, outlined by the State Securities Commission, aims to attract a larger influx of foreign investment.
Vietnam has been under consideration for an upgrade by global index provider FTSE Russell since 2018 but is currently classified as a frontier market, which restricts the investment flow from various funds and family offices into the nation’s listed companies.
An upgrade to emerging market status could channel an estimated $5 billion into Vietnam's financial markets, according to estimates from the World Bank.
The government has released a comprehensive four-phase plan, which extends to 2027, to facilitate this upgrade.
This roadmap was presented during a visit to Hanoi by FTSE Russell's global head of equity and multi-asset, Gerald Toledano.
Key components of the plan include finalizing the legal framework and establishing a Central Counterparty-operating subsidiary under the Vietnam Securities Depository and Clearing Corporation.
In a meeting with Toledano, Prime Minister Pham Minh Chinh expressed hopes that FTSE Russell would support Vietnam’s upgrade.
Toledano noted that Vietnam's strong market liquidity currently exceeds that of its regional counterparts, Thailand and Singapore.
However, while Vietnam’s financial market is showing potential, it remains comparatively small.
As of the latest data, the main benchmark stock index has a market valuation of approximately $245 billion, compared to around $455 billion for Thailand's main index and approximately $490 billion for Singapore’s STI Index.
The CCP will serve as an intermediary in equity trades, providing assurance that transactions are completed even if one party defaults.
Vietnam has already undertaken various reforms to overcome challenges hindering its potential reclassification.
These reforms include implementing a new transaction settlement system and eliminating the requirement for overseas investors to fully pre-fund equity trades.
Following the announcement of a recent trade agreement between the United States and Vietnam, foreign investments in Vietnamese stocks have increased significantly.
The benchmark VN-Index has gained 7.22% so far this month, indicating growing confidence among investors.
FTSE Russell is scheduled to conduct a review in September 2023.
Should Vietnam receive the upgrade to secondary emerging market status, the reclassification process could take between six and twelve months, in accordance with FTSE Russell's procedural guidelines.
Vietnam had previously envisioned achieving this upgrade by 2025.
The initiative, outlined by the State Securities Commission, aims to attract a larger influx of foreign investment.
Vietnam has been under consideration for an upgrade by global index provider FTSE Russell since 2018 but is currently classified as a frontier market, which restricts the investment flow from various funds and family offices into the nation’s listed companies.
An upgrade to emerging market status could channel an estimated $5 billion into Vietnam's financial markets, according to estimates from the World Bank.
The government has released a comprehensive four-phase plan, which extends to 2027, to facilitate this upgrade.
This roadmap was presented during a visit to Hanoi by FTSE Russell's global head of equity and multi-asset, Gerald Toledano.
Key components of the plan include finalizing the legal framework and establishing a Central Counterparty-operating subsidiary under the Vietnam Securities Depository and Clearing Corporation.
In a meeting with Toledano, Prime Minister Pham Minh Chinh expressed hopes that FTSE Russell would support Vietnam’s upgrade.
Toledano noted that Vietnam's strong market liquidity currently exceeds that of its regional counterparts, Thailand and Singapore.
However, while Vietnam’s financial market is showing potential, it remains comparatively small.
As of the latest data, the main benchmark stock index has a market valuation of approximately $245 billion, compared to around $455 billion for Thailand's main index and approximately $490 billion for Singapore’s STI Index.
The CCP will serve as an intermediary in equity trades, providing assurance that transactions are completed even if one party defaults.
Vietnam has already undertaken various reforms to overcome challenges hindering its potential reclassification.
These reforms include implementing a new transaction settlement system and eliminating the requirement for overseas investors to fully pre-fund equity trades.
Following the announcement of a recent trade agreement between the United States and Vietnam, foreign investments in Vietnamese stocks have increased significantly.
The benchmark VN-Index has gained 7.22% so far this month, indicating growing confidence among investors.
FTSE Russell is scheduled to conduct a review in September 2023.
Should Vietnam receive the upgrade to secondary emerging market status, the reclassification process could take between six and twelve months, in accordance with FTSE Russell's procedural guidelines.
Vietnam had previously envisioned achieving this upgrade by 2025.
