Investors during a trading day (Photo: VNA)
Hanoi (VNS/VNA) - Global provider of benchmarks, analytics and data solutions FTSERussell last week kept Vietnam on its watch list as a frontier market.
Vietnam was added to thewatch list a year ago for possible reclassification to secondary emergingmarket status.
The market “continues tofail the ‘clearing and settlement – T 2/T 3’ criterion which is currently ratedas ‘Restricted’, due to the market practice of conducting a pre-trading checkto ensure the availability of funds prior to trade execution,” FTSE Russellsaid in its statement.
“Additional improvementsare sought with regard to the registration of new accounts where marketpractice can extend the registration process and also the introduction of anefficient mechanism to facilitate trading in securities that have reached, orare approaching, their foreign ownership limit between non-domestic investors.”
FTSE Russell alsoacknowledged Vietnamese market regulators have made “constructive interaction”in the last twelve months to develop and improve the capital market while italso looked forward to “continuing the engagement”. This failure had been widelyexpected.
According to Bao Viet Securities Company (BVSC), no bigimprovements have been made since FTSE Russell’s last review in September 2018.
One big problem is theamended Law on Securities, which has not been approved by the NationalAssembly.
Compared to the previousinterim review on March 2019, Vietnam meets seven of nine criteria required forits upgꩵrade to the secondary emerging market status.
Besides the “clearing andsettlement” criterion, Vietnam needs to improve the “settlement – rareincidence of failed trades” but it needs further information for assessment,according to FTSE Russell.
According to FTSERussell, Vietnam needs to follow the international practice of delivery andpayment, meaning an investor will pay for shares after he receives them.
Under Article 7.2 ofCircular 203/2015/TT-BTC dated December 21, 2015 by the Ministry of Finance, aninvestor can only place a buy order after he proves to have a sufficient amountof cash in the account.
If the investor has adeposit at a bank, the bank must have the confirmation letter or the letter ofcredit on his placed order before he can execute the transaction. This can helpinstitutional investors trade without proving they have a sufficient amount ofcash.
However, very few bankscan offer institutional investors a letter of confirmation or a letter ofcredit as there are no specific instructions for this activity. Besides banks,securities companies can provide the same thing to investors if they areallowed by the State Securities Commission.
Vietnam will be reviewedfor possible reclassification as a secondary emerging market within the FTSEcountry classification scheme at the a𒐪nnual review in September 2020, FTSEadded./.
