Restore confidence, ensuring healthy development of stock market

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Stock market liquidity saw continuous drops in 2022. Photo: ST

Experiencing many ups and downs

Speaking about the development of the capital market in 2022, the Ministry of Finance says that, facing the influence of economic-political fluctuations in the world as well as policy adjustments in the country, the Vietnamese stock market has experienced many fluctuations, with a downtrend starting from April, including recovery spans in May, August, late November until now.

As of November 30, 2022, Vietnam's benchmark declined 30% compared to the end of 2021 to 1,048.42 points. Meanwhile, the HNX-Index declined 56% compared to the end of 2021 to 208.79 points. As a result, the market capitalisation of HoSE, HNX and UPCoM on November 30, 2022, was estimated at VND 5,383 trillion, down 30.7% compared to the end of 2021, equivalent to 63.5% of GDP.

Market liquidity also saw continuous drops during this period. In the first 11 months of 2022, the average trading value reached VND 20,556 billion/session, down 22.7% compared to the average of 2021. The fluctuations mentioned above in the stock market mainly stem from investors' cautious sentiment in the face of instability and a less positive outlook on the world economy - politics.

As for the Government bond market, by the end of November 2022, the market had 389 listed codes with a listed value of more than VND 1,651 trillion, up 9.3% compared to 2021. In terms of transaction size, in the first 11 months of 2022, the average transaction value reached VND 8,062 billion/session.

For corporate bonds, as of November 25, 2022, the corporate bond issuance volume was VND 331,811 billion, down 31.6% year-on-year. Credit institutions, real estate enterprises, and construction companies still account for a large proportion. Commercial banks and securities companies are the main investors for private corporate bonds, owning 45.3% and 23.91% of the total issuance volume, respectively. Meanwhile, individual investors account for 9.44% of the total issuance volume. The year 2022 also witnessed an increase in early repurchase activities, with the total repurchased bonds since the beginning of the year reaching VND161,656 billion, up 14.1% compared to the whole year of 2021.

The derivatives market saw a brighter picture, with the average trading volume of futures contracts on the VN30 index in the first 11 months of 2022 reaching 259,478 contracts per session, up 37% compared to the average in 2021. Likewise, the open interest volume (OI) as of November 30, 2022, reached 51,635 contracts, rising 66% compared to the end of 2021.

The stock market continues to attract investors. By the end of October 2022, the domestic investors rose 55.7% compared to the end of 2021 to nearly 6.7 million accounts.

Creating market confidence

To develop the capital market to meet the economic development goals, the Ministry of Finance has identified vital tasks. In terms of institutions, the Finance sector will continue to comprehensively review the provisions of the Securities Law and guiding documents to overcome inadequacies and obstacles promptly, thereby restoring confidence and ensuring the healthy, transparent and sustainable development of the stock market; review and amend Decree No. 65/2022/ND-CP to ensure the legitimate rights and interests of both enterprises and investors; select amendments to maintain market stability and build market confidence in the Government's management.

In 2023, the Finance sector will accelerate the operation of the KRX information technology system to support the launching of new products and services on the stock market and ensure smooth, safe, and effective market operation. Also, the Ministry of Finance (State Securities Commission) will direct related parties to prepare a separate corporate bond trading platform to develop a transparent and secure secondary market and enhance management capacity and minimise risks; promote the restructuring of the stock market, improving the competitiveness and quality of market intermediary institutions through the continued restructuring of securities companies and fund management companies according to the scheme approved by the Prime Minister.

In addition, the Finance sector will increase the supply to the market and improve the quality of the supply in the stock market, bond market and derivatives market; and research to be ready to launch new products such as futures contracts on new indices; registration of Omnibus account and certificate of depositary receipt (DR), e-passbook shareholder service (E-passbook); and continue to research and develop a new set of indexes to serve the launching of new products for the derivatives market.

Regarding supervision and inspection in the market, Ms Vu Thi Chan Phuong, Vice Chairwoman of the State Securities Commission, said that the State Securities Commission would enhance the role and responsibilities of supervisory lines, in which it is necessary to attach importance to the first line of supervision, which is securities companies to ensure a transparent and efficient market.

Regarding the corporate bond market, economist Can Van Luc said that the liquidity of the corporate bond market and the interlinking risks between the corporate bond market, the monetary market, and the asset market would be a significant risk in 2023 and 2024. Thus, the Government should have specific and feasible plans and solutions to deal with corporate bond risks.

Control capital mobilization of real estate enterprises in stock market

Regarding products on the derivatives stock market, Mr Can Van Luc said that the Ministry of Finance and the State Securities Commission should soon develop new derivative securities products such as futures contracts on other stock indices, single stock futures, and options contracts to diversify products and overcome limitations of current VN30 index futures and attract domestic and foreign investors.