Hanoi (VNS/VNA) – Vietnam’s securities market may be upgraded to theemerging market status from its current frontier market by 2020, according tothe latest SSI Retail Research.

The local securities market has grown rapidly and reached 191billion USD in total value by the end of March 2018, equivalent to 95 percentof the GDP (gross domestic product) in 2016 and up 24.7 percent against 2017.

It’s as large as the securities markets in the United ArabEmirates and the Philippines and even surpasses some emerging markets such asQatar (131 billion USD), Pakistan (82 billion USD) and Egypt (58 billion USD).

Liquidity also increased sharply to an average of 8.8trillion VND (386 million USD) per session in the first quarter, a growth of 80percent over the average of 2017.

According to SSI Research, five Vietnamese stocks have satisfiedthe Morgan Stanley Capital International Inc (MSCI) requirements in terms ofmarket capitalisation, free-float rate and liquidity and can be added to theEmerging Market Indexes in case the local market is upgraded.

SSI estimates that nine other stocks will meet theserequirements in future. These shares have a market value of over 2 billion USD andgood liquidity but are yet to reach the level of required free-float rate.

In its 2017 market classification review that was carried outin late June, MSCI did not include Vietnam in the review list for a potentialreclassification to the emerging market status.

Thus, Vietnam remained in the MSCI Frontier Markets Index.

Essentially, the country’s securities market has satisfiedMSCI’s quantitative requirements in terms of the market size and liquidity.

However, qualitative conditions will be decisive factors for an upgrade, notonly by MSCI but also by other classification firms, such as FTSE and S&P.

The Government, meanwhile, is doing well in managing macro-economicstability and reinforcing foreign investors’ confidence in the local market.However, the research suggests relaxing the limit of foreign ownership andaccelerating the divesting of State capital in State-owned enterprises tofurther broaden the investment scale for foreign investors. 

On the other hand, the foreign exchange market needs to bemore flexible to facilitate the flow of foreign capital into the country.

According to SSI Research, Vietnam can be upgraded to theemerging market status in 2020 by MSCI, but it requires at least one year forMSCI to seek advice from the international investment community and anotheryear for investment firms to prepare for the changes and portfoliorestructuring.

MSCI will publish its annual market rating and prepare a listof markets that need to be consulted for the next period in June.-VNS/VNA