Stock Market Thrives, Expectations Soar For “emerging Market” Status

The VN Index has been increasing since the beginning of the year

Last June, Vietnam missed the opportunity to be added to MSCI’s (Morgan Stanley Capital International) list of emerging markets in its assessment period.

Three market rating agencies, namely MSCI, FTSE Russell, S&P Dow Jones, give annual periodic assessments. 

The assessment is based on economic development level, political stability, market size and liquidity, market operation efficiency, market access of foreign investors and capital flow capability.

With the sharp price increases in 2017 and the strong rise this year, coupled with lifting of the foreign ownership ceiling and state’s divestment from state-owned enterprises, Vietnam now can satisfy requirements in market scale and liquidity.

Vietnam now has more than three companies which have capital of $1.27 billion and more, transferable capitalization value of $635 million and more, and stock liquidity equal to 15 percent of ATVR (Annualized Traded Value Ratio). 

This means that the number of the companies satisfying MSCI standards is higher than required.

An analyst commented that if compared with Pakistan, which was upgraded in June 2017, Vietnam has a larger scale and higher number of listed companies. 

Vietnam has also been leading frontier markets in terms of growth with a high growth rate of 50 percent last year. 

Market analysts think that Vietnam may be upgraded in June 2020 by MSCI. However, some believe that this may happen sooner, possibly in the assessment period in June 2018.

Meanwhile, a local newspaper quoted Vo Tri Thanh from the Central Institute for Economic Management (CIEM) as saying that Vietnam’s stock market has a 25 percent chance of being upgraded to the “emerging market” status by 2021.

Reports show that the VN Index has increased by 15.2 percent so far this year, while the VN 30 Index has increased by 14.1 percent, of which 28.2 percent increase has been reported for bank shares, 21.7 percent for real estate and 19.3 percent for finance services. 

It is still unclear when Vietnam will be upgraded to an emerging market. However, the price increase of shares with big capitalization values (banking, securities, insurance and real estate) which would help increase Vietnam’s proportion in the MSCI index after the upgrade.

Analysts estimate that Vietnam stock market may obtain a 30-40 percent growth rate after the upgrade, which happened with the Arab Emirates, Qatar and Pakistan.

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