Measures to make Vietnam’s stock market the main channel for mobilising capital

Monday, 2021-01-11 11:05:33
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The capitalisation of Vietnam’s stock market has reached 84.3% of GDP.
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NDO - Vietnam’s stock market has been witnessing explosive trading sessions that have been exceeding all expectations. The trading volume of recent sessions has continually set new records, with the first session of 2021 hitting VND18.580 trillion (over US$800 million).

The capitalisation of Vietnam’s stock market has also climbed to 84.3% of GDP. The buoyant sentiment is bolstering the stock market, with green dominant in most sectors, encouraging investors to buy more in the expectation of big winnings.

Such developments show that the stock market is an efficient investment channel for both investors and listed companies. There were some moments in 2020 when Vietnam’s stock market plummeted as the Covid-19 pandemic prompted foreign investors go into the net short position.

But the market later recovered. In the final months of the year, domestic investors rushed to open new accounts to seek profits, with big money flows propelling the benchmark VN-Index up by 15% compared to the start of the year and up 67% against the bottom established in late March.

What made the stock market attractive was the substantial reduction to banks’ deposit rates and tighter regulations on corporate bonds. But the most important factor helping the stock market to reach new heights is Vietnam’s success in containing the coronavirus and maintaining decent economic growth, becoming a bright spot in the region and the world at large.

With experience and an initial success in preventing the spread of Covid-19 and existing economic potential, the Vietnamese economy and the Vietnamese stock market in particular have been afforded new opportunities.

Many analysts are predicting that the Vietnamese stock market will continue to have a successful year in terms of size and quality. But there are also warnings that the current overheated growth may be unsustainable and that the market could reverse its direction anytime, requiring investors to be cautious of the risks.

In order for the stock market to become the main channel to mobilise capital for the economy, it is necessary to continue implementing synchronous measures and address the market’s weaknesses so that Vietnam’s stock market can be upgraded from a frontier market to an emerging market. Accordingly, efforts should be focused on bringing new policies into life to support enterprises issue stocks and protect investors, promoting the market to develop in a healthy manner.

At the same time, it is necessary to accelerate the plan to restructure the stock market, step up the equitisation of state-owned enterprises and their listings on the stock market, while measures are needed to enhance the effectiveness of management and supervision.

The agencies concerned need to formulate and present to the Prime Minister the stock market development strategy for the 2021-2030 period in order to establish goals and market development measures in the long term.

Furthermore, actions should be taken to ensure safety and security for the trading system, especially as the system at the Ho Chi Minh City Stock Exchange (HOSE) has encountered glitches during sessions with extraordinary trading volumes.