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Situation and solutions to perfect institutional market in Vietnam

To date, the stock market (Vietnam) has 697 listed companies; 374 companies traded on UPCoM with a market capitalization of VND1,947 trillion, or 42.3% of GDP in 2016. In the coming time, to create the basis for Vietnam's stock market to develop and integrate into the financial market. Internationally, the State Securities Commission has put forward many solutions to boost the stock market to develop effectively.

 

Institutional status of the stock market in Vietnam

There are many approaches to market institutions, limiting this article to approach the stock market regime in three areas: (i) Rules for market operation (including molds) Legal requirements, mechanisms, policies and international practices are recognized); (Ii) Market participants (management agencies, securities business organizations, investors, market makers); (Iii) Measures to promote the development of the stock market.

Over the past 16 years of building and development, the institution of the Vietnam stock market has been gradually improved. The market has developed rules to operate through the creation of a uniform, uniform legal framework that gradually overcomes conflicts and conflicts among other relevant legal instruments; To create the basis for Vietnam's stock market to develop and integrate into the international financial market, while improving the market management and supervision capability of the State Securities Commission.

Market size increases every year, so far, Vietnam stock market has 697 listed companies; 374 companies traded on UPCoM, capitalization value reached 1.947 trillion, equivalent to 42.3% of GDP in 2016.

As for the Vietnam bond market, bond debt has reached 24% of GDP, is considered to be the leading growth of emerging economies in Southeast Asia and increasingly affirms the channel of capital mobilization. Weight of government. Market participants have rapidly increased in volume, especially in securities companies, quality, professionalism and efficiency have been gradually improved.

In each stage of development of the market, the Ministry of Finance, the SSC, the Stock Exchanges (STCs)...have introduced many solutions to boost the stock market to develop effectively. However, a comprehensive assessment, the Vietnam stock market still has some shortcomings, in particular:

Firstly, the legal framework for the stock market still does not cover all activities of the market, some mechanisms and policies have not kept up with the evolution of transactions, demand and supply of goods are always unbalanced, affecting the bar. Item of stock.

On the other hand, the stock market is a high market, operating on the principle of market, but many activities related to trading, issuing securities, interest rates, mechanism of price determination and bidding mechanism... did not follow the market principles.

This not only affects the performance of the stock market, but also creates some unpredictable risks while regulatory, supervisory and enforcement regulations are still limited.

About the parts of the stock market: the stock market has had a good growth but the corporate bond market has not developed; Stock market (TTCKPS) is in the process of forming. Due to the undeveloped market of TPDN, medium and long-term capital supply to enterprises and the economy is mainly provided by commercial banks (86%). Meanwhile, over 80% of deposits of commercial banks are term and short term.

Therefore, the current documents of the State Bank of Vietnam (SBV) are required to allow commercial banks to use up to 60% of short-term capital for medium- and long-term loans (until 31/12/2016, then And increase the ratio of buying and investing government bonds to short-term capital of foreign bank branches from 15% to 35%, and state-owned commercial banks from 15% to 25%. This not only pose great risks to the economy and to the financial system in general, but also to risks for both the stock market and commercial banks.

When the pressure on medium and long-term capital for businesses to accumulate in commercial banks is difficult to have stable development in the long term for both banks and the stock market. It is also the situation of using short-term capital for medium- and long-term loans with a large proportion, always with potential risks, so banks' lending rates for enterprises are difficult to reduce. On the other hand, when the new stock market went into operation, the establishment of two Stock Exchanges in Hanoi and Ho Chi Minh City. Ho Chi Minh in accordance with the characteristics of the goods is necessary.

But when the stock exchanges were operating stably, the market size gradually expanded but continued to maintain the two exchanges with mechanisms and commodities traded without much difference, which increased the investment cost of Market members, increased investment in technology development for transaction and also cause difficulties for management agencies in managing and monitoring the market.

Second, about the market participants. So far, there are organizations and individuals participating in the market such as securities companies, investment funds, institutional investors, individual investors, securities depository centers. Securities companies and fund management companies are developing rapidly while corporate governance is not respected and the state management of their operations is inadequate. Loss, low financial capacity, low quality human resources.

This not only affects the existence and development of the securities company itself, but also affect the legitimate rights and interests of investors. Besides the overheating of securities companies, the stock market is still lack of market makers and reputable credit rating agencies so that Vietnam stock market will develop stably. Therefore, the stock market of Vietnam is still underestimated compared with development potential.

The system of investors is increasing, so far there are more than 1.6 million accounts of domestic and foreign investors, of which more than 1 million accounts are owned by investors. personal.

Therefore, the lack of professionalism in most stock exchanges is common. This not only reflects the lack of investment funds to pool the individual funds of individual investors, but also affects the quality of management and supervision of transactions of regulators on the stock market. .

Third, there is no effective coordination mechanism among state management agencies in orienting, managing, supervising and supporting the development of the stock market.

Uncertainties of the market over time, on the one hand, arise from the internal factors of the market such as the lack of close linkages between market segments (primary market, UPCoM market, Stock market, bond market), between the stock market and the foreign exchange market, banking credit market, on the other hand, the lack of some ministries / agencies to deal with issues related to To the stock market.

Financial markets are fragmented, lacking transparency in the governance and accountability of macro-level regulators and supervisors, as well as market information that has not been communicated in a standardized way. Accurate, timely, adequate to investors, while psychological factors are always heavily influenced by rumors ...

Solutions to improve the stock market in Vietnam

Firstly, continue to perfect the principles and legal framework to promote the development of the securities market in a transparent and synchronous manner, ensuring legal rights and interests for investors and appropriate. With international standards.

Completing the legal framework, especially the revised Law on Securities on a consistent basis and consistent with relevant laws for sustainable development of the stock market. At the same time promulgate the new regulations on transactions, information disclosure (CBT), corporate governance, listing and registration of transactions. To supplement and perfect mechanisms and policies (including financial policies and tax policies) with a view to supporting efficient market development sections (market for securities market and securities market) without violating the oranges Integration.

It is necessary to raise the position of the SSC in state management of securities and securities market activities. The SSC must have sufficient authority to perform effectively the state management function of the stock market and to deal with issues related to securities and securities transactions.

To merge the two stock exchanges in order to quickly overcome the current restrictions. The first phase, when merged into a national stock exchange, should operate under the model of 100% state owned one-member limited liability company.

But it is necessary to have a roadmap (until 2018) to soon become a multi-ownership model. The State should only hold controlling shares (up to 65%). It is necessary to clearly separate management functions and business functions to avoid conflicts of interest. When the Stock Exchange is a public stock company, the mobilization of capital to upgrade the infrastructure will be more convenient, dynamic and transparent to ensure.

Secondly, market participants need solutions to improve the quality of their operations. For the securities companies, the management board ... continue to restructure in the direction of raising the requirements on financial capacity, requirements on facilities, corporate governance and human resources requirements, should reduce the number of securities companies through The merger, acquisition, dissolution, direction of some large securities companies are the market makers effective.

Currently, although the number of securities companies has decreased, but compared with the stock market scale of some countries in the region, the number of securities companies in Vietnam is still large (79 Securities), while the market capitalization is still very small.

It is necessary to develop a number of market-creating organizations, namely insurance companies and pension funds. These are organizations with strong financial strength, professional business, and highly connected. In fact, the dynamics, efficiency and transparency of the market depend on the activities of market makers.

Thirdly, develop a coordination mechanism for the administration of policies related to the stock market. Some policies that strongly impact the stock market are monetary policy and monetary policy (CSTT). In the past time, the implementation of monetary policy of the SBV toward the direction of relaxation or tightening has a very strong impact on the liquidity of the stock market. The stock market is also very sensitive to the expansion or narrowing of credit of commercial banks.

These manifestations can only be overcome by improving the quality of market restructuring and market participants. The stock market must properly mean the medium and long term capital mobilization channel for enterprises to serve for production and business as well as to channel idle capital of individuals and organizations inside and outside the country. Accordingly, it is necessary to build and operate effectively each part of the market, to implement the best standards in corporate governance, accounting standards and disclosure.

CSTT and fiscal policy have a close relationship, which has a great impact on the economy and the financial market system. If weak fiscal management increases expectations for inflation, it may increase interest rates and money supply, which will affect government borrowing on the stock market.

In contrast, high inflation and interest rates not only reduce government revenues but also cause stock prices to fluctuate unfavorable for investors due to the liquidity of the market. It is therefore necessary to have a proper and complete understanding of the relationship between these two policies, to strengthen their connection and to reduce their conflicts in order to achieve the same goal.

Fourthly, create good quality goods for the market. The equitization (CPH) of state-owned enterprises (SOEs) should be associated with listing to create quality goods for the stock market.

At the same time, it is necessary to create conditions for strategic investors (domestic and foreign) to buy shares, TPDNs issued by Vietnam enterprises by agreement or auction between strategic investors, To some companies to improve faster in terms of financial capacity, quality management, competitiveness.

In fact, some foreign commercial banks have shown that with the participation of foreign investors at the rate of 20% - 30%, Vietnamese commercial banks have quickly overcome some weaknesses. About financial capacity, technology level, management skills.

Therefore, in order to improve the financial capacity of securities companies, equitised companies as well as joint stock commercial banks, and to increase the attractiveness of stocks of various types of enterprises, including equitized SOEs and joint stock commercial banks. The State has been equitised, but the State is holding a large controlling share, it is necessary to reduce the state ownership ratio to a more reasonable level (up to 65% for some big joint stock commercial banks and 51% for some enterprises. The state should retain the dominant power, less than 30%, even without holding shareholding in SOEs that do not need to hold the dominant power.)

Once the state still holds a large controlling shareholding in joint stock enterprises, it is difficult for the JSBs to have strong breakthroughs, transparency in internal governance, and limited accountability to shareholders.

Only by reducing the direct intervention of the Ministries / sectors in the business sector, the bank will create conditions for enterprises to operate in accordance with the market rules and be responsible for their operations in the past. East, including state shareholders. However, when reducing the proportion of state capital, increasing the ownership ratio of foreign strategic investors, people are often concerned about the problem of acquisition.

To avoid this phenomenon, now the State Bank of Vietnam, the Ministry of Finance can make some regulations for foreign investors and publicly disclose to investors. For example, the rule that an investor must resell (whole or in part) shares after an agreed period of time, with clear benefits to the parties. This has been a number of countries in the region made.

Fifthly, to intensify the inspection and supervision of the operation of organizations participating in the market, to strictly handle violations committed by individuals, organizations and enterprises using the media (newspapers, Information page ...) to give false information, information is incomplete, distort information, or give adverse information to the market without origin.

On the side of the state management agency, there should be a clear and transparent message on the administration of economic and financial policies as well as macro information so that all investors know, understand and strictly obey. provisions of law.

Improve and improve the quality of communication for investors to have easy and timely information on the State's support to the financial market in general and the stock market in particular.

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