Recent resolute actions by the regulators against fraud and manipulation in the stock and corporate bond markets are aimed at protecting the lawful rights of compliant investors and businesses.

Prime Minister Pham Minh Chinh at the conference. Source: VGP

Prime Minister Pham Minh Chinh stressed the view at a conference discussing the development of the capital market held today [April 22].

“The Government remains steadfast in dealing with wrongdoings in the capital market to ensure its rapid and sustainable development.”

According to Chinh, Vietnam’s capital market has fully developed with key components including the stock, bond, and derivatives markets.

During the 2016-2021 period, the capital market expanded by an average of 28.5% per year, with the market capitalization reaching 134.5% of the GDP in 2021, a 3.5-fold increase from 2015. Of which, the size of the stock market is equivalent to 93.8% of the GDP; and the bond market to 39.7%, with governments bonds accounting for 22.7% of the GDP, and corporate bonds 14.2%.

Overview of the conference.

Liquidity on the stock market in 2021 rose by 258% against the average in 2020 to VND30.8 trillion (US$1.34 billion) per session.

“The growing capital market has been a key means of financial resources for the economy, alongside such traditional sources as banking credit,” Chinh added.

In addition to achievements in the capital market, Chinh expressed concern over existing shortcomings in terms of the market structure, infrastructure, technologies, human resources, and wrongdoings of individuals and organizations.

“Cases of wrongdoings, however, are rare. Punishment is necessary to protect lawful rights for the majority of compliant investors and businesses,” he said.

In the coming time, Chinh stressed the Government’s commitment to creating favorable conditions for organizations and individuals trading in the market in compliance with the laws.

“The Government remains firm in dealing with those violating laws in the capital market for unfair gains, protecting the rights of investors,” Chinh noted.

In this context, the Government is committed to taking any necessary means to stabilize the market and support its development towards transparency, safety, and sustainability for socio-economic development and prosperity.

Sharing Chinh’s view, Minister of Finance Ho Duc Phoc expressed his confidence in the outlook of the stock market.

By the end of 2021, the number of securities accounts reached over 4.3 million, while investors have also committed nearly $55 billion into the market, up 21% against late 2020.

In the past five weeks, foreign investors remained net buyers with VND3.6 trillion ($155 million), which showcases their strong belief in the market, Phoc said.

To further support the capital market, Phoc said the ministry aims to enhance the quality of products and push for the privatization of state firms for subsequently listing them on the stock exchange.

In line with the restructuring of the stock market, Phoc expected more attention would be placed on raising the competitiveness and quality of intermediary institutions in the market.

Phoc also called for the formation of professional investment entities and investors, especially investment funds, voluntary pension funds, or insurance companies.

“Individual investors should be equipped with basic understandings before joining the market, while authorities are responsible for providing accurate and official information on the macro-economic situation and the safety of the financial-monetary system,” Phoc added.

Upgrading market status an urgent matter

Giving his view on the stock market, Practice Manager for Finance, Competitiveness, and Innovation in the East Asia and Pacific of the World Bank Group Zafer Mustafaoglu said Vietnam’s capital market size is fast approaching the regional level, which proves the Government’s efforts in creating favorable conditions for market development.

Practice Manager for Finance, Competitiveness, and Innovation in the East Asia and Pacific of the World Bank Group Zafer Mustafaoglu.

Zafer noted the market has now outgrown its frontier status and is on track to be upgraded to the emerging status, saying such a move would further attract international investors to the market.

According to Zafer, an emerging status is expected to bring $10 billion in indirect investment to Vietnam, with around $2-5 billion alone in the first year.

Amid the current turbulence in the capital market, Zafer said its early development stage means there are always issues but urged the Government to refrain from overreacting that may impact the market’s long-term development.

He urged Vietnam to speed up the process of becoming an emerging market by adopting more open policies for indirect foreign investors and raising the quality of the market.

A diversity of products in the market would further reduce the risk of market manipulation, he said.

Country Director of ADB in Vietnam Andrew Jeffries.

Country Director of ADB in Vietnam Andrew Jeffries called for the soon formation of a credit rating system in Vietnam for a transparent and stable capital market, which has become common in neighboring countries such as Thailand, Indonesia, the Philippines, and Malaysia.

Jeffries said ADB is committed to supporting Vietnam to promote the development of the corporate bond market by encouraging international rating agencies to take part in the development of the capital market in Vietnam.