Investors at a trading session at VNDirect Stock Exchange Floor (Source: VNA) Hanoi (VNS/VNA) - Morgan StanleyCapital International (MSCI) has decided to hold Vietnam’s status in the equitymarket in the Frontier Markets Index until 2019.
It means Vietnam will remain in the MSCIFrontier Markets Index for at least two more years before being given a chanceto raise its status from a frontier market to an emerging market.
In its latest report, MSCI announced it includedthe MSCI Saudi Arabia Index in the MSCI Emerging Markets Index and thereclassification of the MSCI Argentina Index from Frontier Markets to EmergingMarkets status beginning June 2019.
More importantly, MSCI disclosed the inclusionof the MSCI Kuwait Index in the 2019 Annual Market Classification Review for apotential reclassification from Frontier Markets to Emerging Markets status. Thedecision was made on June 21.
According to MSCI, the promotion of theVietnamese equity market would depend largely on the improvement of eightitems: foreign ownership limits, foreign room levels, equal rights for foreigninvestors, foreign exchange market liberalisation levels, information andmarket regulation English disclosure, clearing and settlement, andtransferability.
“Regarding Vietnam’s stock market, MSCIrecognised an improvement for the ‘investor registration and account set up’criterion, while maintaining the assessment for all remaining criteria(including nine requirements for improvement),” Bao Viet Securities Co (BVSC)said in a report.
“In general, from our view, the results of theMSCI review indicate slow improvement in Vietnam’s stock market. Even incomparision to the two frontier markets in the region which are Bangladesh andSri Lanka, Vietnam still needs to improve the most,” BVSC said.
There had been speculation that MSCI wasconcerned about strong foreign sell-offs on the Vietnamese stock market sincemid-April when the benchmark VN Index hit its record high of 1,204.33 points,especially after the US Federal Reserves (Fed) raised its interest rates twoweeks ago and signalled two more hikes this year.
Net foreign selling has touched around VNĐ 5trillion since that day and has caused hesitation among foreign investors giventhe context of high local corporate earnings and the stable development of Vietnam’seconomy.
But it may be a good thing for the Vietnameseequity market, according to Nguyen Quang Thuan, CEO of StoxPlus.
Though being promoted to an emerging market orbeing included in the classification review could help the Vietnamese equitymarket lure more foreign capital and make it more transparent, it could alsomake the local market more volatile and riskier, he said on his personal page.
The promotion would attract more portfoliomoney, which could either enter or leave raking, making the Vietnamese equitymarket more volatile as the market has been dominated by individual trading,which accounts for 70 percent of daily trading and has already made itvolatile, he said.
However, market regulators and local enterprisesshould not ignore the latest MSCI announcement for the overall development ofthe Vietnamese market on becoming a internationally-standardised market, hesaid.
According to SSI Research, the Government shouldenhance its divestment from listed firms and other State-owned enterprises(SOEs) to lure more foreign capital inflow.
Moreover, the foreign currency market must bewell-organised to meet the demands of foreign investors wishing to transfermoney in and out of Vietnam, SSI Research said, adding that Vietnam could beraised from a frontier market to an emerging market in 2020.-VNS/VNA
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