VietNamNet Bridge - If everything goes smoothly, the Vietnam stock market may be upgraded to an emerging market by 2020.

Vietnam hopes its stock market would be upgraded to an emerging market by 2020

The Saigon Securities Incorporated (SSI) March financial and monetary report showed that the stock market scale has grown rapidly with value reaching $191 billion by the end of the first quarter of 2018, equal to 95 percent of 2016 GDP, an increase of 24.7 percent compared with the end of 2017. 

The scale is approximate to that of the UAE stock market ($245 billion), the Philippines ($270 billion), and higher than that of many emerging markets, including Qatar ($131 billion), Pakistan ($82 billion) and Egypt ($58 billion).

The market liquidity has also increased to VND8.8 trillion per trading session, rising by 80 percent in comparison with the average level of 2017.

According to SSI, there are five stocks which can satisfy all the requirements set by MSCI and they may be added into the Emerging Markets Indexes if Vietnam’s stock market is upgraded.

The securities firm predicted that another nine stocks would satisfy the requirements in the near future. 

The stocks all have capitalization value of over $2 billion and strong liquidity, but still cannot meet the requirement in terms of transferrable capitalization value due to the low free-float ratio.

In the future, with the accelerated state’s capital divestments and possible ceiling foreign ownership ratio lifting, the nine stocks will be potential choices for MSCI to add to EM Indexes.

Vietnam has satisfied quantitative conditions related to market scale and trading scale to be eligible for the upgrading. 

Quantitative requirements are the final barrier for MSCI, like other institutions such as FTSE and S&P, to consider market upgrading.

The technology platform and infrastructure have been improved with great efforts by state management agencies.

The launch of the derivatives market has provided investors with the necessary instrument to prevent risks. Meanwhile, information exposure in English has not been a big barrier.

Analysts say in the best scenario, Vietnam may get the upgrading by 2020. 

MSCI will need at least one year to collect opinions from the international investors’ community. It will also take investment funds one year to prepare for changes and restructure their investment portfolios.

MSCI is expected to release an annual report on market classification assessment and prepare a list of markets to be consulted for the next review period.

By the end of the first quarter of 2018, Vietnam’s P/E had caught up with the P/E of the US stock market, and was higher than the P/E in Thailand, China and Malaysia.

US$1=VND22,000

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