MoF’s tool box to fix stock markets

What are the major achievements of Vietnam’s stock market?

After 12 years, Vietnam’s stock market has seen many achievements. During 2000-2005, the stock market’s capitalisation to gross domestic product (GDP) ratio was around 1 per cent only, but this ratio reached 47 per cent in 2007 and more than 30 per cent in recent years.

Within 12 years, the stock market has mobilised around VND650,000 billion ($31.2 billion), in which VND550,000 ($26.4 billion) was mobilised since 2005. The number of listed firms has continuously increased from only two companies to 705 companies now. The size of listed companies is constantly expanding, while many giant companies, banks and corporations are formed by raising capital through the stock market.

 The number of investor accounts also increased from 2,900 accounts to nearly 1.2 million accounts, which mobilised nearly $10 billion in foreign investment. The stock market’s legal framework and infrastructure has been gradually strengthened and expanded. The management and supervision of the stock market has been significantly improved and the stock market is getting more transparent.

What about stock market limitations?

Vietnam’s stock market still has some weak points such as non-diversified products, low issuance quality and poor capital use efficiency. The market is still volatile as its liquidity, supply and demand are sometimes unstable. There are too many securities companies while the market scale is still small. These companies’ risk management capabilities are also low. The stock market’s structure and infrastructure is being improved, but it is hard to follow the development and integration speed of the economy.

To overcome the shortcomings, what are the MoF and State Securities Commission focusing on?

To develop the stock market sustainably, the government already approved  the stock market development strategy for 2012-2020 and the MoF submitted a stock market and insurance companies restructuring plan to the government, which focused on restructuring the four pillars.

First, improving the quality of stock market products together with diversifying securities and insurance products and services. Improving the quality of corporate governance, risk management of the issuers, ensuring the market transparency and step-by-step applying of international standards and practices is also on the cards.

Second, narrowing the number of intermediary financial institutions and consolidating securities companies based on international practices. Third, diversifying investors base, increasing organisational investors and encouraging medium and long-term indirect foreign investment, while enhancing corporate governance and supervision, applying appropriate solutions to promptly and actively deal with capital flow volatility. Fourth, organisationally restructuring the market based on the long-term development objectives of Vietnam’s stock market.

What are the short term measures that the MoF and SSC will implement to help the stock market soon become the  medium and long-term capital mobilisation channel for the economy?

The MoF and SSC will focus on some main tasks. These include implementing Decree 13/NQ-CP focusing on solutions related to tax, investment, prices, consumption stimulation, social security and debt handling in order to relieve the burden for enterprises in production and support economic growth, which will have positive impact on the stock market.

We will continue to promote equitisation, create more qualified products and attract domestic and foreign resources for economic development. Liquidity of the stock market will be improved by lengthening the transaction time, adjusting margins, applying new business transactions and reviewing the stock market tax policy.

At the same time, we will raise the listing standards on the stock exchanges by arranging products in two stock exchanges. Reviewing, classifying and dealing with weak enterprises, aiming at improving the corporate governance and financial safety, reducing the administrative procedures in foreign indirect investment and specifying the provisions to implement World Trade Organization commitments.