Developing new products and enhancing the value of businesses to attract investment

Reportedly, in the past period, HOSE has welcomed lots of foreign delegations who came to work and study about the Vietnam stock market. However, the actual foreign capital inflow into the market has notchanged much. What are the causes of this situation?

In 2016, there have been many international delegations visiting and working at HOSE. It shows that the Vietnam market in general and Vietnam stock market in particular are destinations of foreign capital flows in the world.

However, there are still many difficulties and problems that caused the capital flows not to show the potential as expected. Specifically, the market structure is not complete, the market is not clearly defined, this situation caused the market to reduce the ability to access and absorb foreign capital. The transparency and governance of businesses are not good enough since those factors of most of the companies listed on the HOSE are still lower than the ASEAN standards. Goods on the market are also less diverse in terms of quantity and quality compared to the region, there is no other product, apart from Stocks, Bonds and Fund certificates. In the countries with a developed stock market, besides the main products, the derivative products are also available, such as Options, Swaps, Futures and many other structure products.

In addition, despite the policy of increasing the rate of foreign ownership under the provisions of Decree No. 60/2015/ND-CP, not many companies implemented this policy and still have many difficulties; the ability to access the information in English of foreign investors has improved according to Circular No. 155/2015/TT-BTC, but the announcements of the listed companies are slow and not comprehensive.

So, what solutions does HOSE have to solve these difficulties?

In order to attract foreign capital flows, HOSE and management offices at all levels have executed many solutions, for example: improve liquidity, company management, and the transparency of information on the market; recent highlights are the increase in the rate of foreign ownership and the shortening of the payment circle T+2. Statistics show that the transaction value of foreign investors on HOSE has increased slightly since the beginning of the year.

In the near future, HOSE and the management officeswill continue to research and deploy appropriate measures to promote capital flows more strongly, for example: deploy the Covered Warrant product, implement the intraday trading mechanism for the market, etc. in order to build the Vietnam stock market to become stronger and stronger.

Currently the market capitalization of the Vietnam stock market is still considered relatively low. In the past, what has HOSE done to improve this and what is the future plan?

The market capitalization of Vietnam stock market is about $US 60 billion, equivalent to 35% GDP of Vietnam, which is too small compared with other countries. The Vietnam stock market is only 1/5 of Philippines stock market – the smallest market in the ASEAN Exchanges on size. Therefore, HOSE always focuses on implementing solutions to increase market capitalization of the Vietnam stock market, including the solutions to strengthen the listing support for companies associated to HOSE in the process of equitisation.

In addition, HOSE has also actively enhanced the value of businesses to attract investment and increasedthe market capitalization of the listed companies. Accordingly, HOSE has intensified training to raise awareness and focus on corporate governance and risk management for listed companies according to international standards, andplanned a roadmap to make the criteria for corporate governancebecome the mandatory provisions of the Regulation of the Securities Exchanges (SE). At the same time, the capacity and competence of the SE in monitoring the implementation of regulations on corporate governance of the listed companies should be improved; companies should be encouraged to self-improve to meet the selection criteria of the international index MSCI, Dow Jones Sustainability Index and the ASEAN Corporate Governance Scorecard; businesses should be also encouraged to participate in social and environmentactivities besides profit goals.

HOSE has also executed solutions to attract investment flows into the market through the increasing of meeting with investors and developing new products. In particular, HOSE has intensified meetings with investment organizations, especially international investors to be able to introduce and promote the image of HOSE. In the second quarter of 2016, HOSE has welcomed more than 10 delegations who came to study about the activities of HOSE, the development of new products, the construction of new IT systems of HOSE, the restructuring situation of the Vietnam stock market, the investors’ situations, and the development potential of the market.

The development of new products and services has always been focused to have the best support for investors, thereby capital inflows are attracted into the market. In October 2016, HOSE, in collaboration with HNX, deployed the VNX Allshare index to the market in order to provide an indicator for the whole Vietnam stock market, to help investors to have an overview of Vietnam market, and to be able to analyze and assess the market potential in a more specific way. In 2017, HOSE is going to deploy the Covered Warrant, a potential product to attract investment in the market. In addition, HOSE is intensifying researching to promote the corporate bond market to be deployed to the market soon.

Currently, investors are waiting for a higher classification of the Vietnam stock market. Could you please share more information about the deployment as well as the progress of the plans in order to achieve this goal?

To be officially listed as an Emerging market, Vietnam must have synchronous policies and activities of the members of the market and management agencies. Relating to resolving the issues related to improving the market class, HOSE is coordinating closely to the State Securities Commission to enforce and implement the specific solutions to improve the market class as well as the issues of foreign ownership rates, the equality between domestic investors and foreign investors, or solutions on market liquidity.

Recently, HOSE has adopted a number of solutions to improve the transaction mechanism, such as splitting the price step, increasing the trading volume of trading orders in order to decrease the trading costs of investors. Since the application of the new mechanism, trading liquidity has improved which shows that investors have accepted the changes in a positive way.

In the near future, HOSE will continue to research other specific solutions to create a solid foundation for the sustainable development of the market. This promotion is a long-term effort reflecting the maturity of the Vietnam stock market, so we cannot expect one or some temporary solutions to help the market to improve.

Thank you, ma’am!