Securities, bond markets set for strong 2019

Trần Văn Dũng, chairman of the State Securities Commission, speaks to Vietnam News Agency about the securities market’s prospects this year following negative growth in 2018.

What’s your assessment of the size and quality of the stock and bond markets?

The Vietnamese economy developed strongly in 2018 with macroeconomic indicators such as GDP growth, import-export turnover, inflation, the exchange rate, interest rate and budget spending meeting or beating targets set by the National Assembly.

The securities market, despite seeing a strong decline due to the volatility of global stock markets, recorded increases in market capitalisation and trading liquidity. It remained a key fund-raising channel for private firms and made great contributions to overall economic development.

The stock market value reached VNĐ3.96 quadrillion (US$170.3 billion) in 2018, up 12.7 per cent year-on-year. The figure was equal to 72 per cent of the nation’s total GDP and outperformed the NA target set for 2020 (70 per cent). The average trading value of stocks and fund certificates was VNĐ6.55 trillion in each session, up 29 per cent year-on-year, and total value of newly-listing shares gained 12.8 per cent to VNĐ1.21 quadrillion.

Despite recent growth, the size of the Vietnamese stock market was smaller than those of other regional markets such as Thailand ($548 billion), Malaysia ($456 billion) and Singapore ($787 billion). In each of those countries, the value of the stock market was more than 100 per cent of its total GDP.

There was also a strong development on the Vietnamese bond market in 2018. There were 573 listed bonds with total value of VNĐ1.12 quadrillion, up 10.4 per cent year-on-year. Of the figure, the value of government bonds (G-bonds) accounted for 98 per cent of the total and the remaining were corporate bonds. The size of the Vietnamese bond market was equal to 35.2 per cent of Việt Nam’s total GDP, which was also modest compared to other regional and international bond markets such as Malaysia (97.7 per cent), Singapore (86 per cent), the Republic of Korea (125.7 per cent) and Japan (211.4 per cent).

What opportunities and challenges face the Vietnamese securities market in 2019?

We have to be aware of external factors that could impact the domestic securities market though it is predicted to receive intense support from the stability of the macroeconomy and last year’s market performance.

Concerns include the unpredictability of the US-China trade tensions that may have negative effects on global trade, economy and capital flow, and the upcoming interest rate increases of the Federal Reserve, which may raise capital expenses on foreign investors, forcing them to run away from emerging markets like Việt Nam.

Regarding internal factors, there is a big chance for the Vietnamese securities market this year. The development, management and operation of the market have gained special attention from the Government, the Prime Minister and officials.

At a Government meeting last year, the Prime Minister emphasised the importance of institutional reform and the development of the private sector. The co-working of ministries and sectors with the combination of fiscal and monetary policies has proved effective and helped stabilise the macroeconomy and the securities market.

The Government recently issued Resolution 01/NQ-CP, which mentions the further development of the securities market through new financial and securities products, and the equitisation, restructuring and listing of State-owned enterprises.

The development of the private sector, improvement of the business environment and enhancement of SOE equitisation in 2019 are expected to provide the securities market with a huge load of high-quality options. In addition, the Vietnamese economy is forecast to perform better in 2019 as it is lifted by the profound fundamentals achieved in previous years. Budget spending, interest rates and inflation are being kept at acceptable levels and the ongoing development of the amended Law on Securities is expected to help improve the market in the near future.

Under the management of the Government, the Ministry of Finance and the State Securities Commission (SSC), with the presence and participation of market members, I believe the Vietnamese securities market will seize its opportunities to foster future growth. The SSC will continue co-operating with other ministries and agencies to create a good legal system to lure foreign capital to the market.

What policies has the SSC adopted to guide market development in 2019?

To shape a stable, sustainable and efficient securities market in 2019, the SSC will implement both long-term and short-term solutions to make it healthier and stronger. In 2019, the top priority is to get the amended Law on Securities and related instructions approved, such as the instructional document on handling securities violations approved by the National Assembly.

The SSC will also enhance the restructuring of the securities market, complete  tasks to establish the Vietnam Stock Exchange, and restructure the operation of brokerage and asset management firms by reducing their numbers and improving their quality. The SSC will also promote solutions to upgrade Việt Nam from a “frontier market” to an “emerging market” by the standards set by Morgan Stanley Capital International (MSCI) and the Financial Times Stock Exchange (FTSE).

The policies will focus on luring foreign capital and foreign investors, resolving problems with foreign ownership caps by issuing the revised Law on Securities, and developing additional securities products to draw more participation of foreign investors in the market. The SSC will also work with market members and other government agencies to improve transparency, and reduce administrative procedures to make trading faster and more precise for foreign investors, saving them time, effort and expense.

The commission will co-operate with ratings organisations, including the MSCI, to update information about the Vietnamese securities market and provide international organisations with a clearer, more insightful outlook of the Vietnamese market. In addition, the SSC will promote the Vietnamese securities market as a transparent and sustainable entity to international investors and ratings organisations.

In 2019, the SSC will continue working with local bourses to launch covered warrant, g-bond futures and other stock index futures like the current four VN30 Index-referred futures. — VNS