Milestones in Vietnam’s Stock Market: A Landmark Year in Review

By Ta Phu, Minh Hue
Sat, December 30, 2023 | 8:22 am GMT+7

Vietnam’s stock market has navigated a year filled with transformative events in 2023. Significant milestones, including a directive from the Prime Minister to elevate the market’s status and various economic challenges, have marked this period. Let’s explore the ten key developments that defined this pivotal year.

PM Orders Drastic Solutions to Upgrade Stock Market

On December 13, Prime Minister Pham Minh Chinh galvanized the financial landscape by directing the Ministry of Finance to work alongside the State Bank of Vietnam and other agencies to expedite Vietnam’s upgrade from “frontier” to “emerging” market status. This ambitious endeavor aims to lure more foreign capital and institutional investors into the market.

In a country where the stock market has grown steadily over two decades, now boasting a capitalization of $246 billion and an average daily trading value nearing $1 billion, the upgrade is a part of a broader government roadmap set for completion by 2025. Despite momentum, international bodies like MSCI and FTSE Russell still categorize Vietnam as a frontier market, likening its situation to a “big fish in a small pond,” with Vietnamese stocks making up 29% of the MSCI index.

Trading Platform Launched for Private Placement Corporate Bonds

A significant leap was made on July 19 with the launch of the secondary trading market for private placement corporate bonds at the Hanoi Stock Exchange. This advancement in Vietnam’s corporate bond market promotes transparency, reduces transaction risks, and bolsters liquidity, essential for sustainable primary market growth.

The inaugural period from July to December illustrated robust activity with 206 issuers registering 760 bond codes, valued at approximately $21.4 billion. The cumulative trading value during this period reached about $7.83 billion, demonstrating a positive initial reception.

Strong Impacts of Interest Rates and Exchange Rate Fluctuations

In a countertrend move, the State Bank of Vietnam initiated a series of interest rate cuts starting in March, with four policy interest rate reductions over three months. This proactive approach propelled the stock market toward growth, resulting in a more than 20% rise in the VN-Index during peak months.

However, these cuts eventually triggered a rise in the domestic USD prices, led by global trends from continuous U.S. Federal Reserve rate hikes. By the end of August, this fluctuation led to significant foreign capital outflows and a downside correction lasting into November, with the stock market dropping approximately 18%.

Cleaning Up Investor Account Data

November saw an unprecedented cleanup of stock accounts, leading to a sudden decrease of over 545,000 accounts. This was largely due to securities firms addressing “legacy” accounts from earlier periods and consolidating data.

Prime Minister Chinh’s instruction to integrate the national database with the trading platform emphasized the need for improved transparency in the stock trading environment, further streamlining the investor experience.

Vietnamese Firms List on Foreign Exchanges via Backdoor Listings

August 15 marked a historic milestone as VinFast became the first Vietnamese company to trade on the U.S. Nasdaq through a backdoor listing. This move opened doors for other enterprises, like tech unicorn VNG Corporation, which plans to follow suit, highlighting a new strategy for Vietnamese firms seeking international visibility.

Foreign Capital Flows Backwards

As a surprising trend continued, the Vietnamese stock market faced record net selling by foreign investors for the second consecutive year. By December, the total net selling value surpassed $988 million, primarily influenced by exchange rate movements and restructuring of global capital flows. Active funds withdrew massively, even as a positive ETF investment narrative lingered.

Soft Landing for Private Placement Corporate Bond Market

After tumultuous bursts of uncertainty in 2022, the private placement corporate bond market managed a ‘soft landing’ this year. The introduction of Decree 08/2023 significantly helped stabilize the market by permitting extensions on bond payments and enabling alternative asset usage for bond repayments.

By December 25, private placement corporate bond issuance reached VND 245.9 trillion ($10.13 billion), demonstrating a cautious but positive recovery amidst previous market turmoil.

Compulsory Delisting and Absence of New Listed Firms

Despite challenges, 2023 recorded minimal new stock listings. The Ho Chi Minh Stock Exchange welcomed only five new listings while witnessing 13 companies forcibly delist due to losses and disclosure failures. This trend was seen across exchanges as businesses navigated unfavorable climates for new capital.

Stronger Measures Against Administrative Violations

In 2023, regulatory bodies broadened their enforcement efforts, issuing 409 sanctions totaling nearly $1.52 million. With heightened vigilance against violations, several cases drew criminal prosecutions, particularly notable in the manipulation incidents involving FLC, Louis Holding, and APEC.

Sharp Decline in Share Issuances

Reflecting a quiet year in capital mobilization, overall share offerings dropped significantly compared to the previous two years, with only three successful IPOs. Tightened approval processes and unfavorable market developments contributed to these dynamics, demonstrating the need for a cautious approach as the market recalibrates.

These events collectively underline Vietnam’s ongoing evolution in the stock market landscape, setting a foundation for future growth while navigating challenges posed by both local and global economic shifts.