Diversify and innovate securities products to attract foreign investors

Mr. Kojima Kazunobu, Chief Advisor of the Japan International Cooperation Agency (JICA)

JICA is cooperating with the State Securities Commission (SSC) to implement the project “Capacity enhancement for promoting the efficiency of Vietnam’s stock market”. So what is the biggest goal of this project, sir?

In the period of 2019-2023, the SSC and JICA signed a cooperation agreement on the Project “Capacity enhancement for improving the fairness and transparency of Vietnam’s stock market”. After this project ended, the ongoing project “Capacity enhancement for promoting the efficiency of Vietnam’s stock market” will last from April 2024 to March 2027. We expect that these cooperation projects can contribute to upgrading Vietnam’s stock market to the status of an emerging market and integrating more deeply into the international capital market.

The project has three main areas of activity. First, strengthening market surveillance capacity to help securities agencies and exchanges enhance the detection, management and prevention of unfair transactions. Second, improving and developing the quality of market intermediary institutions, including securities companies and fund management companies. Third, improving public offering and listing management capacity, including public offerings using internationally standardized methods, strengthening listing standards and inspection activities, and enhancing information disclosure, including non-financial information of listed companies.

Could you specify the activities enabling to improve public offerings and listings in line with international standards?

Regarding the third issue, “Improving public offerings and listings in line with international standards” is expected to create a premise for major changes in the future in a way that benefits foreign investors. This depends on progress in discussions on shifting Vietnam’s current initial public offerings (IPOs), which are conducted through auctions to an underwriting and book-building method, in which the IPO is implemented simultaneously with the listing approval procedure.

If this is done, foreign investors, including Japanese investors, will be able to invest in attractive, newly listed stocks right from the IPO stage, which is expected to significantly opened their investment opportunities in Vietnamese stocks.

In your opinion, what further improvements are needed in the Vietnamese stock market to attract more foreign capital?

If large companies and emerging companies with investment appeal raise capital through IPOs and listings, a large amount of foreign capital will flow in. However, in recent years, the number of companies conducting IPOs and new listings on the Vietnamese stock market has been very limited. The best opportunity to attract foreign investors to invest in the Vietnamese stock market is to increase the number of newly listed companies to diversify and renew securities products. In fact, the current IPO auction process makes it difficult for foreign investors to participate. Hopefully, a new IPO method, compatible with international standards such as underwriting/book building, will soon be established.

In the short term, in the recent past, Vietnam has made many legal improvements to expand the market. However, in the medium and long term, Vietnam needs to make more efforts in developing the market in both quality and quantity, to become a potential market, attractive to foreign investors. Through many technical and financial cooperation projects, I believe that JICA can continue to support Vietnam’s thriving economic development and its deep integration. Japan will also support the State Securities Commission, stock exchanges and related parties through technical cooperation to further promote the fairness, transparency and efficiency of the Vietnamese stock market, thereby contributing to promoting Vietnam to soon complete the Strategy for Developing the Vietnamese Stock Market to 2030, with the immediate goal of upgrading the stock market, promoting sustainable development.

How do you evaluate the level of interest of Japanese investors in the Vietnamese stock market? In your opinion, what is an appropriate time for the Vietnamese stock market to be upgraded from a frontier market to an emerging market?

Foreign investors, including Japanese investors, are highly appreciating the growth prospect of the Vietnamese stock market in Southeast Asia, and are paying a lot of attention to the Vietnamese stock market. Currently, the management agency has decided to remove the condition that foreign investors must deposit 100% before trading, aiming to upgrade by 2025. This decision is highly appreciated by foreign institutional investors in reforming the legal corridor, helping to remove barriers for f investors when they want to invest in the Vietnamese stock market. Along with that, Vietnam is participating in dialogues with market rating organizations, promoting investment attraction in Singapore and Japan. We hope that Vietnamese authorities will continue to take measures to address the issues raised through dialogue with credit rating agencies MSCI and FTSE Russell, thereby realizing the goal of upgrading by 2025.

Thank you very much!