Tools within reach to establish robust stock market

June 22, 2023 | 08:00
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A talk show in Hanoi last week provided valuable insights into the development narrative of financial products, regulatory frameworks, and potential investment opportunities.
Tools within reach to establish robust stock market
Tools within reach to establish robust stock market, illustration photo/ Source: Shutterstock

At the talk show, themed “Unleashing capital influx in the stock market” and held by VIR, Ta Thi Thanh Binh, head of the Market Development Department at the State Securities Commission (SSC), noted that to establish a robust market presence, well-managed and publicly listed companies played a pivotal role.

Consequently, the SSC has directed efforts towards enhancing corporate governance practices by integrating state-of-the-art technologies in environmental, social, and governance management. This initiative seeks to create a solid business foundation that meets domestic standards while gaining access to the international capital market.

In light of recent volatility in the derivatives market, Binh highlighted the importance of diversifying the range of available commodities.

“Currently, the lack of variety in this market has led to increased volatility, primarily due to excessive investor attention on a single product. To address this issue, the SSC plans to introduce new derivative products, such as futures contracts on the VN100 index. Subsequently, the focus will expand to include futures contracts for other underlying assets, such as stocks, and ultimately encompass options contracts,” Binh said.

“To support these endeavours, the expedient implementation of the Korean Exchange trading system is paramount. This system not only facilitates the deployment of new products, but also greatly assists regulatory bodies in market surveillance through the application of advanced IT.”

In a proactive move, Binh revealed that the SSC plans to introduce a secondary market for individual corporate bonds in July. This development is expected to play a vital role in addressing recent bottlenecks within the corporate bond market.

Dang Thanh Tam, chairman of Kinh Bac Urban Development Corporation, said that foreign capital essentially comes in two forms: long-term institutional investment and individual investments.

The former is usually linked to macroeconomic policies and the quality of commodities on the stock market. Additionally, individual investments are of crucial importance, with accounts from abroad increasing in Vietnam. If regulatory procedures from account registration to fund transfers become more convenient and liberalised, this will undoubtedly hasten the process, he added.

Tam is confident that with Vietnam’s increasing exports and subsequent growth in foreign currency, the government will gradually ease regulations, creating opportunities for foreign individual investors to effectively utilise short-term capital.

The importance of trust was also underscored, particularly following the recent decrease in confidence domestically and internationally.

Tam said that if there were specific guidelines, the implementation process would be smoother. Even though progress has been made in the past year with more favourable trade and investment policies, further refinements were necessary since individual investors significantly impact the market.

“The crisis last year due to negative incidents at certain companies and the stern policy by authorities also needs to be looked. An example could be to establish a risk investment fund, similar to Singapore, which could help resolve these issues,” he said.

Helping businesses in times of need is essential for the economy, according to Tam. Immediate action is needed to boost falling GDP, and the government should expedite legal procedures and increase the money supply, he said.

Tran Huy Doan, director of the Derivatives Market Division at ACB Securities Company (ACBS), believes that in the second half of the year, a continued push for public investment disbursement will improve capital inflows and stimulate the economy.

“As Vietnam is considering shifting focus from trade policies to national industrial development policies, ACBS foresees positive prospects for the securities and industrial real estate sectors in the short term,” he said.

“The reduction of benchmark interest rates will benefit the securities sector, while industrial real estate will gain from multinational corporation expansion and relocation trends. In the long run, ACBS expects the banking sector, industrial real estate, fast-moving consumer goods, textiles, retail, and energy sectors to benefit.”

Nguyen Vu Long, chairman of VNDIRECT, also highlighted two main themes for potential investment opportunities, including interest rate reduction and accelerated public investment disbursement.

“We recognise the significance of public investment, which remains a prominent theme throughout 2023. It acts as a driving force for economic recovery, with the government expediting key infrastructure projects to achieve a minimum of 95 per cent disbursement of public investment capital,” Long said.

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