Stock market: ensuring the stability and sustainability is a top priority

Mr. Tran Van Dung

Sir, what do you think about the development of the Vietnamese stock market over the first 5 months in 2018?

The stock market had a strong growth in the first quarter of 2018, the VN-Index reached out of the historical peak set in 2017, reaching 1,204.33 points (on April 9, 2018), increasing by 22.4% compared to the end of 2017.

However, from mid-May to May 23, the market tended to adjust as sessions moved up and down sharply. From the time VN Index reached the highest peak in history (April 9, 2018), the VN-Index on May 24, VN-Index decreased by 18% to 985.92 points. Although the index fell, but the stock market capitalization has increased sharply because the first half of 2018 had many large-scale listed companies, typically Vinhomes. The market capitalization scale reached 3.846 trillion VND, increasing by 9.4% compared to end of 2017, equivalent to 76.8% of GDP.

Foreign investors were net sellers in May. As of May 23, foreign investors were net sellers of 4,229 billion VND on both exchanges. However, foreign capital inflows were relatively high at $US 615 million in April and $US 450 million in the first half of May, showing that foreign investors still have expectations for the market and are ready to disburse at the appropriate time.

Total mobilization in the first 5 months of the year was estimated at 90 trillion VND (down by 32% compared to the same period). In the first 5 months of 2018, more than 57.6 trillion VND has been mobilized through government bond bidding and 26.4 trillion VND through equitization and divestment through two departments.

Firstly, the adjustment of the stock market in Vietnam occurred in the context of world stock markets’ lower adjustments before the impact of the world economic and political situation; US-China trade tensions could cool down but this prospect has not diminished investor sentiment about a trade war between the world's two biggest economies. The Federal Reverse System will increase interest rates in June and the European Central Bank will possibly raise interest rates sooner than expected. Foreign investors started to withdraw money from emerging markets, including South East Asia. Global stock markets from the US, Europe, and Asia have all been down since January 2018, with a common fall of 7-10%.

In addition, the stock market in Vietnam has increased strongly for a long time and is entering an adjustment phase. The VN-Index in 2017 increased by 48% and increased by 17% in the first quarter of 2018, so investors have had a profit-taking psychology. The psychology that took place at the time when the world stock market adjusted down, so the resonance effect is greater.

Because of the impact of the economic and political situation, both foreigners and domestic investors recently took profit in stocks that had strong price increases since the beginning of the year; they were also reserved in new disbursement and waited for the right opportunity to continue investing.

However, with good macroeconomic growth; financial market - currency, foreign exchange stability, interest rates in loans (in VND) tends to decrease; foreigners still have withdrawals, there is no sign of withdrawing capital from the stock market; In terms of business conditions, the profitability of listed companies remained stable. In the long term, the Vietnamese stock market still has many opportunities to move smoothly in the coming time.

So what is the key mission of the SSC at this moment?

One of the key tasks of the SSC in 2018 is to develop a draft Law on Securities (amended) on the basis of major policies groups in the proposal to develop the Law, which was approved by the Government on August 31, Decision 83/NQ-CP. The Securities Law (amended) will be developed with the following major revision orientations:

Firstly, for commodities on the stock market: improving conditions, standardizing the order and procedures for securities issuance/offering which is suitable to securities; improving the quality of public companies by adjusting the criteria of public companies; diversifying commodities on the stock market.

Secondly, on the stock exchange: determining the organization and operation model of the Stock Exchange (SE); expanding securities trading activities on the basis of the formation of market sectors; defining roles and responsibilities of the Stock Exchange in monitoring transactions.

Thirdly, on registration, depository, compensation and payment of securities: clearly identifying the operational and management model of the Vietnam Securities Depository (CSD) to expand the professional activities of the VSD; standardizing regulations on standards, orders and procedures for securities registration, depository, compensation and payment.

Fourthly, on attracting foreign investment: defining the concept of foreign investors; determining the foreign ownership ratio of public companies in the securities market of Vietnam; reviewing and reforming investment procedures of foreign investors on Vietnam's securities market.

Fifthly, on corporate governance: standardizing the rules on governing the management of public companies, securities companies and securities investment fund management companies.

Sixthly, on securities business organizations: standardizing the regulations on licensing the establishment and operation of securities business organizations in line with the Law on Enterprise; strictly regulating the conditions for establishment of securities companies and fund management companies; specifying the function of a securities company or a securities investment fund management company.

Seventhly, disclosing information on the stock market: clarifying the subject of obligation to disclose information; supplementing information to be announced; managing and supervising the disclosure of information.

Eighthly, on the fulfillment of tasks and powers of the SSC in supervision, inspection, examination and verification of violations: supplementing the provisions on a number of rights for the SSC to ensure that the SSC is competent to inspect, check, supervise and enforce, contributing to the healthy stock market, which is observing the law, protecting the legitimate rights and interests of investors.

In the context of sublimation stock market trading over the time, what is the direction in the development of the stock market in the future, sir?

The SSC's priority this year is to maintain the stability and sustainability of the stock market, develop the stock market in depth and persist in restructuring the stock market.

In order to continue to promote its achievements, ensure its role as a channel for raising capital for the Government, enterprises and the economy, and at the same time attracting domestic and international investors, the development of the securities market development policy in the coming time will continue to focus on the following solutions:

Firstly, perfecting the legal framework and improving the management and supervision capacity, with the focus on implementing the amended Law on Securities and submit it to the Ministry of Finance for submission to the Government, which is expected to be submitted to the National Assembly for consideration and commenting in 2018 and approval in 2019.

Secondly, continuing to effectively participate in the mobilization of capital for state budget, equitization, state capital withdrawal in enterprises associated with the listing and registration of transactions to take advantage of opportunities, increase the size of the market; combining the work of increased scale and quality of enterprises through the implementation of the Decree 71/2017/ND-CP.

Thirdly, continuing restructuring the organization of market operations, improving and modernizing infrastructure, information technology, improving the quality of transactions and trading on the stock market through: the merger of the stock exchanges and development and delistings of market sectors - stock market, bond market and stock market - to enhance the position of the SE in the ASEAN region; deploying modern and comprehensive IT systems for the market at SEs, VSDs and IT application projects in service of market management and supervision at the SSC.

Fourthly, continuing to accelerate the process of preparing new products, including CW HOSE and Government bonds futures of HNX during this year.

Fifthly, collaborating with the relevant units to prepare the necessary conditions for the formation of the corporate bond market, which is expected to be put into the market in 2019.

Sixthly, continuing to strengthen the inspection, supervision and handling of violations on the stock market. Supervision will be carried out comprehensively for activities of manipulating the price of trading and operating activities of the Stock Exchange, Securities Trading Center, Securities Company and auditing companies which is auditing the public companies. We think that this is a very important task to ensure fairness and transparency for the stock market, thus promoting the market for sustainable development.

Thank you, sir!