What Prospects for Vietnam's Capital Market?

10:37:36 AM | 6/4/2021

Despite facing many unpredictable events, Vietnam's capital market is expected to develop more strongly and more evenly in the new era.

Speaking at the Forum “Capital Market Development - Opportunities in the New Era” in Hanoi, Ms. Nguyen Le Thuy, Editor-in-Chief of the Economy and Forecast Review, said that Vietnam's economy is showing the likelihood of positive recovery. The country’s GDP expanded by only 2.91% in 2020, hammered by the COVID-19 pandemic impacts, but grew by 4.48% year on year in the first quarter of 2021.

Remarking on the stock market, Dr. Nguyen Tu Anh, Director of the Central Economic Commission, affirmed that Vietnam's stock market has so far achieved remarkable development since its inception, but its fundraising function is underperforming. Stock diversification is still poor, resulting in high volatility in the market. Meanwhile, ample unemployed funding in the economy, a sharp slump in deposit rates, and a steep drop of government bond yields are facilitating the development of the stock market in particular and the capital market in general in a new context.

Mr. Dang Quyet Tien, Director of the Department of Corporate Finance under the Ministry of Finance, said the capital market development will also stimulate State-owned enterprises (SOEs) to mobilize capital on the equity market to reduce the ratio of commercial credit loans, ease pressures on domestic fees and diversify forms of capital mobilization.

From the perspective of an independent expert, Dr. Can Van Luc, said, the opportunity for balanced development in Vietnam's capital market is huge. Specifically, capital market development is favorable. The legal framework is increasingly improved (with the introduction of the Securities Law, the Enterprise Law and the Investment Law, effective from January 1, 2021); the macroeconomic foundation is solid; prospects for recovery and development are quite good; the market size and liquidity are increasing; P/E ratios attractive in comparison with regional markets; and incomes look up rapidly as more and more investors enter the stock market, resulting in more capital flows into the market from individuals.

However, according to economist Can Van Luc, the new era will also require efforts for better corporate governance, investor professionalism and market operation. He predicted that people and technology are two breakthroughs for the coming development of the Vietnamese capital market.

On the business side, a representative of HAPACO Group - the first northern company listed on the Vietnam stock market, said that before there was the stock market, the company had had only one way to get funding - through banks. Since the stock market was opened, HAPACO and many other businesses have been able to raise a lot of money from public investors, thus enabling them to expand investment funds, shareholders, partners and markets.

Regarding investment prospects in the new decade, Mr. Pham Tien Dung, Research Director of Bao Viet Securities Company, predicted that the Industry 4.0 era will change the way investment banks, securities companies and investment funds interact with customers. Conventional business models will be changed.

To develop the capital market in the coming time, he suggested studying and considering life insurance and pension insurance as deductible expenses when personal income tax is calculated to encourage public savings to support the capital market development. In addition, stock market regulators need to set up research funds and mechanisms to support Fintech research and startup projects concerning securities, asset management and fund management.

By Ha Thu, Vietnam Business Forum