HCMC – FTSE Russell, a global provider of benchmarks, analytics, and data solutions, has retained Vietnam on its watchlist as a frontier market, with a review scheduled for March next year.
The transition of Vietnam’s stock market to Secondary Emerging market status has faced delays, which have been partially attributed to disruptions caused by the Covid-19 pandemic, FTSE Russell said in its report on September 28.
A critical issue remains the “Settlement Cycle (DvP)” criterion, currently rated as “Restricted.” This status stems from Vietnam’s practice of conducting a pre-trading check to ensure the availability of funds before executing a trade, resulting in a lack of failed trades and rendering the “Settlement – costs associated with failed trades” criterion unrated.
Further complicating progress are challenges in the process of registering new accounts. Vietnam also lacks an effective method for trading between non-domestic investors in securities that are approaching their foreign ownership limit.
Vietnamese authorities are actively addressing these limitations, with both the Government and the State Securities Commission of Vietnam (SSC) seeking solutions to pre-funding requirements, according to FTSE Russell. However, clear guidelines and a specific timeline for implementation are yet to be defined.
According to SSI Research, a market upgrade could significantly benefit Vietnam by attracting foreign investments. The quantitative criteria for the upgrade are not substantial obstacles for the country; instead, it is the qualitative criteria that present challenges.
Addressing these issues will require coordinated efforts from multiple regulatory bodies, including the State Bank of Vietnam, the Ministry of Finance, and the SSC. Legal amendments are also expected to be discussed.