Stock Market 2021: Continued Breakthrough Expected

In 2020, many international organizations said that Vietnam's stock market was one of the 10 most resilient stock markets to the Covid-19 pandemic and the best performer in the world. Mr. Pham Hong Son, Vice Chairman of the State Securities Commission (SSC), shared with our reporter valuable information about spectacular breakthroughs in 2020 and development directions of Vietnam's stock market in 2021. Huong Ly reports.

Vietnam's stock market witnessed a steep slump because of the Covid-19 pandemic outbreak, but strongly rebounded in the last months of 2020. Could you please depict the overall picture of Vietnam's stock market in 2020?

2020 was an unpredictable year for the world financial market in general and Vietnam's stock market in particular. However, overcoming numerous difficulties, Vietnam's stock market was one of the 10 best performers in the world when it was heavily impacted by the Covid-19 pandemic. The VN-Index surpassed 1,100 points, reaching 1103.87 points, or 14.9% higher than it closed 2019. The HNX Index soared 98.1%.

The stock market and the bond market continued to keep their growth momentum. The stock market capitalization valued nearly VND5,294 trillion, an increase of 69% compared to the end of the first quarter and 20.8% compared to the end of 2019, equaling 87.7% of the country’s GDP in 2019. The bond market had 477 listed bonds valued at VND1,388 trillion, an increase of 16.8% over the end of 2019 or 23% of the GDP.

Market liquidity increased sharply to a record high, showing the appeal of the Vietnamese market despite Covid-19 pandemic impacts. The daily trading value averaged over VND7,420 billion in 2020, an increase of 59.3% over 2019. The bond liquidity continued to grow strongly, averaging over VND10,393 billion a session, 13% higher than in 2019.

The number of newly opened domestic investor accounts rose to a record of 393,659 accounts in 2020, an increase of 94% as compared to 2019. Foreign investors opened 2,856 new accounts in the year. Thus, by the end of December 2020, securities trading accounts totaled more than 2.77 million, 16.7% more than at the end of 2019.

The derivative stock market continued to play an effective hedging role. The average trading volume reached 156,852 contracts per session, 77% more than in 2019. As of December 31, 2020, the OI (open interest) volume of the whole market reached 40,339 contracts, 143% more than the end of 2019.

As much as VND413.7 trillion was channeled into the securities market in the year, representing a growth of 30% over the end of 2019. The bond market attracted nearly VND350 trillion into government bonds whose coupon rates was 0.78-1.14% lower than in 2019 and VND39,895 billion into corporate bonds, up 40% year on year.

The management and restructuring of securities trading organizations made progress. In 2020, two securities companies were removed from the controlled status; one securities company was terminated, one was added to the control list; two fund management companies were revoked operation licenses; and one fund management company was suspended from operation. The operation of securities trading organizations was basically stable and growing.

In the context of the Covid-19 pandemic, the SSC intensified inspection, supervision and coordination to regularly monitor and promptly handle law violations on the stock market to keep the stock market development stable. In 2020, the SSC issued 380 sanctions, fining VND22.2 billion on violating organizations and individuals. Two stock fixing cases were prosecuted.

Why did Vietnam's stock market make an impressive comeback even in a very tough time like the Covid-19 pandemic?

Vietnam's stock market recovered steadily and dramatically climbed at the end of 2020, boosted by various factors. Firstly, Vietnam effectively controlled the pandemic and revived its economy. Besides, the recovery of the stock market was supported by many other fundamental factors. First of all, the domestic macroeconomic performance improved: Vietnam was among a few countries posting economic growth in the year, climbing 2.91%, took a record trade surplus, and controlled inflation, exchange rate and interest rate in the targeted range. In addition, although the Covid-19 pandemic breakout dramatically affected manufacturing and business activities of listed companies, particularly aviation and tourism companies, many of them still reported positive business results. Up to 84% of listed companies reported a profit in the third quarter of 2020, showing their good resilience to the Covid-19 pandemic.

Moreover, the Ministry of Finance and the State Securities Commission issued market support policies to help enterprises to cope with difficulties. The Ministry of Finance cut 50% on 20 out of 22 fees and charges in the securities sector; discounted and exempted 15 types of securities services. In addition, the SSC introduced many market support measures such as streamlining administrative procedures, guiding companies to organize online shareholder meetings; directed two stock exchanges, the Vietnam Securities Depository (VSD) and market members to work out solutions to run the stock market amid the pandemic outbreak. Basically, these effective solutions helped the market to develop stably.

From the perspective of international integration, what position and role did Vietnam's stock market gain on the world capital market map?

According to the latest FTSE Russel market ranking released in September 2020, Vietnam's stock market was considered for upgrading to secondary emerging markets. This was a positive signal for Vietnam's stock market in the context of pandemic developments gravely wrecking the world economy in general and the Vietnamese market in particular.

In addition, in 2020, with the recognition and upgrade of the Kuwaiti market, the ratio of the Vietnamese market in the Frontier Market basket increased a lot. According to MSCI's classification system, since the beginning of December 2020, Vietnam's stock market has officially secured the biggest share in the frontier markets basket. This has attracted the attention of investment funds tracking the MSCI Frontier Markets 100 Index.

During the past time, the SSC has actively applied technical assistance of the World Bank (WB) on market upgrading within the framework of the J-CAP capital market development program. Technical assistance focused on market operations in order to assess and advise on solutions to remove obstacles to market upgrade, from Frontier Markets to Emerging Markets according to the classification of MSCI and/or FTSE Russell.

With such moves, I believe that the upgrade review will have favorable progress and the upgrade likelihood of the Vietnamese stock market will be clearer in 2021 when the pandemic is controlled and many important legal documents come into effect, including the Securities Law, the Investment Law and the Enterprise Law.

Entering the year 2021, what important solutions do you think will create momentum for steady stock market growth?

Firstly, the SSC will continue to achieve key objectives such as enforcing the Securities Law 2019 and other legal documents, promoting communications on the law and other legal documents widely informed to investors, enterprises and market members.

Secondly, the SSC will develop a strategic project for stock market development in 2021 - 2030 to shape goals and solutions for the long-term stock market and capital market development roadmap.

Thirdly, we will further restructure the stock market under the plan approved by the Prime Minister. In particular, in addition to perfecting the apparatus of the Vietnam Stock Exchange and stock exchanges under the Government's Decision 37/2020/QD-TTg dated December 23, 2020. We will build a basic roadmap for restructuring the stock, bond and derivative markets to enhance specialization and professionalization; and restructure the intermediary system in the market according to directions of the Government.

Fourthly, to soon complete and operate the new synchronous information technology system at the Stock Exchanges and the VSD, we will develop the corporate bond market and new products according to the roadmap approved by the Prime Minister.

Amid unpredictable developments of the Covid-19 pandemic, we will continue to apply solutions to remove difficulties against enterprises, foster equitization and divestment of State-owned enterprises and listing of their shares on the Stock Exchanges to increase the size and quality of equities for the market, enhance the market size and liquidity, and introduce new products. In addition, the SSC will strengthen supervisory, managerial and enforcement capabilities to run the market transparently and lawfully.

Source: Vietnam Business Forum