Foreign investors want Vietnam to adopt best stock market practices

By Kim Anh    December 5, 2018 | 12:47 pm GMT+7
Foreign investors want Vietnam to adopt best stock market practices
Front view of the Hanoi Stock Exchange. Photo by Shutterstock

Foreign investors are calling for scrapping the stipulation that investors must have funds and securities beforehand to trade.

Dominic Scriven, head of the Vietnam Business Forum’s (VBF) capital market working group, made the proposal at the VBF event in Hanoi Tuesday in which Prime Minister Nguyen Xuan Phuc participated.

This is excessive regulation, Scriven said, especially since it applies to both investors and brokerages.

The regulation is out of touch with international and regional best practices, which apply this only to brokerage firms and not investors, he noted.

Scriven claims the rule affects market liquidity, diminishes the role and dynamics of brokerage firms and causes investors, especially foreign, to suffer sizable costs for currency exchange.

The working group proposed amendments to the Securities Law to remove this requirement while ensuring market safety.

In most markets around the world, "short" selling and buying without putting up money upfront are allowed, meaning investors can buy stocks without having to have money in their account or sell without possessing a stock. They are subsequently allowed to square off the transaction or pay cash as the case may be.

Dominic Scriven is executive chairman of Dragon Capital, a Vietnam-focused financial services group. Photo acquired by VnExpress

Dominic Scriven is executive chairman of Dragon Capital, a Vietnam-focused financial services group. Photo acquired by VnExpress

Scriven also proposed allowing non-voting depository receipts (NVDRs), saying this would allow foreign investors to invest in public companies and listed firms even after the foreign ownership cap is reached.

"NVDRs may help resolve two issues. Firstly, the government can still keep a check on foreign equity in line with existing laws and international treaties. Secondly, the legal status of a company does not change when the foreign equity ratio passes 51 per cent."

Pham Hong Son, vice chairman of the State Securities Commission (SSC), said the SSC is seeking market stakeholders’ comments on amendments to the Securities Law, and many proposals are under consideration.

He said the government plans to introduce stringent requirements to improve the status of Vietnam from a frontier to an emerging market.

"In fact, certain key criteria for the upgrade such as size, market transparency and information disclosure are basically met."

According to the working group, Vietnam has three securities markets with a total capitalization of some $180 billion. These are the Ho Chi Minh Stock Exchange, the Hanoi Stock Exchange and the unlisted public company market UpCom. The country also has a bond market with a capitalization of around $50 billion.

The combined $230 billion is quite large and exceeds the ratio of 80 percent of GDP set by the government last year, the working group said in a report.

 
 
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