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When will Vietnam’s stock market be classified as ‘emerging’?

The Director of the State Securities Commission’s (SSC) Market Development Department, Nguyen Son, said that Vietnam is struggling to upgrade its stock market from frontier to emerging by the end of the year.

When will Vietnam’s stock market be classified as ‘emerging’?

MSCI on June 15 refused to add Chinese stocks to its MSCI Emerging Markets Index, but accepted to do this with Pakistani stocks, even though the Pakistani stock market is just 1/100 the size of the Chinese market.

KSE100, the Pakistani stock index, immediately soared by 2.78 percent to 38.560 points. The index has increased by 15 percent so far this year, the highest increase among Asian markets, according to CafeF.vn.

Joining MSCI Emerging Markets Index has been a great success of Pakistan. The international press estimates that foreign investors would buy $400 million worth of Pakistani stocks after the market is upgraded.

Vietnamese also hope that the Vietnamese stock market would get the MSCI recognition as an emerging market.
Vietnam is struggling to upgrade its stock market from frontier to emerging by the end of the year.
An analyst said MSCI pays special attention to the liquidity level when assessing markets, while it has for the third time refused to add Chinese stocks to the Emerging Markets Index because of the reason.

The problems in liquidity, the limits in foreign ownership ratios and the slow pace of the state-owned enterprise equitization all are reasons that make the Vietnamese stock market stay in ‘frontier markets’. 

Investors, for example, don’t have many opportunities to buy Vinamilk shares, favorite shares, because the State now holds 45 percent of Vinamilk’s capital, while foreign investors can hold no more than 49 percent of stakes in the dairy production company.

Commenting about Son’s statement that Vietnam is making every effort to see its stock market upgraded into emerging by the end of the year, the analyst said the goal may be unreachable for Vietnam.

Regarding market scale, the value of the Vietnamese stock market is $69 billion (for all the Hanoi and HCMC Stock Exchanges and UpCom). Meanwhile, the figure is $80 billion for Pakistan. The GDP per capita in Pakistan is $1,275, while Vietnam’s is 50 percent higher.

Dau Tu Chung Khoan quoted its sources as reporting that there are two existing problems to foreign investors’ market access.

First, the implementation of Decree 60 that allows foreign investors to hold up to 100 percent of stakes in Vietnamese enterprises is meeting some difficulties.

Second, under current regulations, the information exposure in English is not mandatory for enterprises, thus making it difficult for foreign investors to get information about enterprises.

Andy Ho from VinaCapital said if Vietnam’s stock market gets a boost, the foreign capital to Vietnam may increase by 15-20 percent.
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