The Evolution of the Vietnamese Stock Market: A Journey of Growth and Transformation

The Vietnamese stock market has undergone remarkable changes since its inception, transforming from a fledgling system into a dynamic and crucial component of the nation’s economy. The journey began on July 28, 2000, with the debut of the Hồ Chí Minh Securities Trading Centre, now known as the Hồ Chí Minh Stock Exchange (HoSE). This milestone marked the beginning of Vietnam’s engagement with global stock markets, albeit with only five listed securities and a modest market capitalization of VNĐ986 billion, equivalent to approximately US$39 million.

Initial Growth and Expansion

In the early days, the stock market was characterized by limited trading options and a lack of investor participation. At the outset, the market facilitated transactions for just 32.1 million shares. The initial perception of the stock market was cautious, with many potential investors outside of the market unsure about the risks and benefits involved. However, over the past 24 years, there has been substantial growth in trading volumes, market capitalization, and the diversity of financial instruments available.

As of May 2024, the landscape has radically changed, with a staggering 2,183 traded securities comprising stocks, bonds, derivatives, ETFs, and more. The volume of listed securities has skyrocketed to 237.6 billion, with stocks accounting for 170.8 billion of that total. This evolution illustrates the increased demand and supply dynamics in a once immature market.

The Rise of Derivatives and Risk Management

One noteworthy aspect of this transformation has been the introduction and growth of the derivatives market since 2017. Products such as VN30 index futures and government bond futures have not only provided investors with more choices but have also served as effective risk management tools. The VN30 index futures contract, for instance, has grown at an impressive annual rate of 38.6% from 2018 to 2022, reaching an average trading volume of 21,900 contracts per session by May 2024. This remarkable growth reflects investors’ increasing sophistication and willingness to engage in more complex financial instruments.

Increasing Market Capitalization and Investment Mobilization

By the first quarter of 2022, the stock market’s total capitalization had achieved a commendable level, representing 134.5% of Vietnam’s GDP—a significant increase compared to just 0.28% at its inception. The market capitalization alone surpassed 70% of GDP for the first time in 2020, illustrating the stock market’s importance as a channel for capital mobilization. From 2011 to 2020, capital raised through the securities market reached nearly VNĐ2.9 quadrillion, almost ten times that of the previous decade, showcasing the stock market’s critical role in the nation’s economic infrastructure.

Investor Participation: A Diverse Landscape

The increase in the number and quality of investors has been another important aspect of the market’s evolution. As of now, over 7.9 million securities accounts have been registered, which accounts for about 8% of the Vietnamese population. The rise of both retail and institutional investors, both domestic and foreign, has contributed significantly to improved corporate governance and overall market transparency. This diversification in the investor base represents a shift toward a more sophisticated market, positioning it as a launching pad for enterprises to grow in both scale and quality.

Modernization of Trading Systems

The technical infrastructure of the stock market has also evolved in parallel with its growth. Trading mechanisms have transformed from infrequent order matching to continuous execution, allowing for more responsive and dynamic trading experiences. This shift has encouraged participation by making trading more convenient and accessible. Moreover, the settlement period has been reduced from T+4 to T+2, which enhances operational efficiency and improves liquidity.

A Robust Legal Framework for Sustainable Growth

Underpinning these advancements is a strong legal framework designed to protect investors and ensure market integrity. The 2006 Securities Law established essential protections for investors and aligned Vietnam’s market practices with international standards. This framework has undergone necessary amendments in 2010 and 2019, reflecting the market’s evolving needs and the country’s deeper integration into the global economy. The Securities Market Development Strategy aims for ambitious targets, including increasing the number of investor accounts to nine million by 2025 and eleven million by 2030.

Challenges and Future Prospects

Despite the impressive growth trajectory, challenges remain, particularly in attracting foreign investment. Since 2024, foreign investors have net sold nearly VNĐ60 trillion on the HoSE, reversing previous trends. To combat this, efforts are underway to elevate Vietnam from a frontier to an emerging market status. Achieving this milestone could open the gates to significant capital inflows from international funds, enhancing the market’s overall health and sustainability.

Conclusion: The Road Ahead

As Vietnam’s stock market continues to evolve, the measures being put in place, such as modernization in trading practices and strengthening regulatory frameworks, are indicative of a maturing market. The ambitious goals set by the government and market participants signal a commitment to not only grow but to maintain the quality and integrity essential for long-term success. As Vietnam navigates these complexities, the focus remains on attracting both domestic and foreign investment, thereby cementing its place as a significant player regionally and globally.