The Vietnamese stock market has undergone remarkable transformation, with a significant rise in the number of listed companies, market capitalisation, and trading value. As the market continues to expand, there is an urgent need to improve investment quality and trading standards to ensure long-term sustainability.
Aiming for a New Era of Development
To drive sustainable economic growth in 2025 and beyond, Vietnam must accelerate market reforms, leverage available resources, and implement breakthrough strategies. The securities sector plays a crucial role in this transformation by improving infrastructure, enhancing service quality, attracting international investors, and mobilising medium- and long-term capital for businesses and the state budget.
A transparent, secure, and appealing investment environment is essential to positioning Vietnam’s stock market as a trusted destination for both domestic and foreign investors.
Encouraging Institutional Investment for Stability
Currently, Vietnam’s stock market has over 9.2 million trading accounts, with retail investors dominating daily transactions. Data from securities companies show that retail investors contribute approximately 75% of market liquidity, a stark contrast to markets like Hong Kong and South Korea, where institutional investors play a more dominant role.
To achieve high-quality and sustainable growth, Vietnam must increase the presence of institutional investors. In mature financial markets, retail investors often invest through fund certificates or entrust capital to professional fund managers, ensuring a more stable and structured investment ecosystem.
Regulatory Reforms to Attract Foreign Capital
To make Vietnam’s stock market more accessible to foreign institutional investors, the Ministry of Finance and the State Securities Commission (SSC) have been refining the legal framework. One of the key milestones is Circular No. 68/2024/TT-BTC, which took effect on November 2, 2024. The regulation removes the prefunding requirement, allowing foreign investors to purchase shares without needing to pre-deposit funds in their accounts.
Additionally, the amended Securities Law, recently approved by the National Assembly, further facilitates the participation of professional institutional investors, making the market more attractive to global capital.
According to Duong Ngoc Dung, a professional investor, these regulatory changes are critical for attracting foreign funds and improving market stability. He pointed out that the high participation of retail investors often leads to excessive volatility, driven by speculation and the FOMO (Fear of Missing Out) effect. The introduction of a central counterparty clearing (CCP) model and increased institutional participation will help mitigate these fluctuations and create a more resilient investment landscape.
Enhancing Market Quality and Investor Confidence
Despite efforts to upgrade Vietnam’s stock market, foreign investors continue to sell off shares, highlighting the need for further improvements. To regain investor confidence, the market must focus on expanding high-quality investment opportunities and addressing key limitations.
One major challenge is the shortage of high-quality stocks, partly due to delayed IPOs and the slow pace of state-owned enterprise (SOE) equitisation. The recent approval of the State Asset Management Law is expected to accelerate SOE listings and privatisations, introducing new supply sources to stabilise and expand the market in 2025 and beyond.
Additionally, the government is prioritising reducing state ownership in sectors where it is no longer necessary, encouraging businesses to list publicly and improve corporate governance and transparency. Loosening regulatory restrictions on foreign ownership will also attract more institutional investors, contributing to a more balanced and stable market structure.
Facilitating Foreign Investment and Market Upgrades
Vietnam’s efforts to attract foreign institutional investors should align with broader national credit rating goals and the participation of large international asset management firms. This includes:
- Diversifying financial products tailored to foreign investors
- Enhancing oversight through professional fund management companies
- Strengthening corporate governance standards
To lay the foundation for long-term market development, the government will continue revising and updating regulations on foreign ownership limits, investment restrictions, and short selling mechanisms. These changes aim to increase foreign participation, boost market liquidity, and make Vietnam’s stock market more integrated with global financial systems.
Vietnam is committed to modernising its stock market, ensuring sustainable growth, and attracting high-quality investment. By refining regulations, expanding investment opportunities, and encouraging institutional participation, the country is taking significant steps toward establishing a stable, transparent, and globally competitive financial market.
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Source: Vietnam Insider