Vietnam will attract more foreign capital, improve its transparency and the investment environment when its market is upgraded from frontier to emerging.
Dr. Can Van Luc, Chief Economist of BIDV, said that if Vietnam strives its best with good growth this year, Vietnam’s stock market will be considered to be included in the watchlist of MSCI, one of the world’s largest financial market rating agencies.
According to the regulations, Vietnam will need at least another two years to be considered upgraded.
This means that in the best perspective, Vietnam will be upgraded from the frontier market to the emerging market by MSCI by 2021.
According to Luc, the upgrade of Vietnam stock market brings four major benefits.
The first is to increase the ability to attract capital into the Vietnamese market in the context of many investment funds ready to pour money into emerging markets. This expert estimates that there will be another US$5 billion to US$10 billion invested in Vietnam each year which is a significant amount.
The second is to help increase transparency. As an emerging market, information will be more standardized with the application of international accounting mechanisms.
The third is to promote stronger institutional reforms related to the investment environment as well as the information disclosure.
The fourth is that the upgrading of stock market rank will show the level of development of Vietnam financial market.
However, Vo Tri Thanh, former vice president of the Central Institute for Economic Management (CIEM), Vietnam only has possibility of becoming “emerging markets” successfully of 25 per cent.
Thanh showed that there are three reasons why it is difficult for Vietnam to meet MSCI’s upgrading criteria.
The first is that the disclosure of information must be in English. Thanh said that this factor is very difficult for Vietnamese enterprises, especially for small and medium ones. This difficulty is not only the capacity of Vietnam companies but also its resources and costs.
The second factor is the participation of foreign investors or the degree of openness to foreign investors.
The third is the level of ease of capital transfer. The former vice president of CIEM said that this is the most difficult factor in Vietnam. In 2000, Vietnam set a target in the next ten years, VND became to have convertible currency but until now, the target can be said is not done yet.
Contrary to carefulness of Thanh, “If we try our best as well as when we participate in the international playgrounds like CPTPP, these issues will be solved,” said Can Van Luc.
Can Van Luc highly appreciated the State’s efforts in achieving the market upgrading in the past years such as improving the business environment and the size of the stock market. The signing of the CPTPP is a very positive move for the financial market.
Le Thi Le Hang, CEO of SSI Asset Management Company, said that in the past two years, Vietnam government has changed a lot in the way of equitisation when it is ready to reduce the ownership ratio, improve liquidity as well as fairness.
In 2018, the equitization trend is expected to be further strengthened, Hang said.