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Banking & Finance

Merger appears near for stock exchanges

Released at: 14:31, 10/07/2017

Merger appears near for stock exchanges

Photo: HNX

Plans now in front of PM, according to finance ministry.

by Quang Huy

The long-awaited plan to merge Vietnam’s two stock exchanges to create a single bourse has landed on the Prime Minister’s desk, according to the Ministry of Finance (MoF)’s first half report.

The move will create “the best conditions” for investors who currently have to spend a lot of time studying the two bourses and their listed companies before making investments.

Better efficiency and safety are the two other ultimate aims of the merger, helping to bring the stock market and capital market more balance within the overall structure of the country’s financial markets.

Aiming to boost investment in one of the fastest-growing markets in the region, the plan for a combined exchange has been mooted since 2011 but progress has been slow. The single bourse was initially planned to in Hanoi.

Post-merger, all shares of listed companies will be transferred to trade on the Ho Chi Minh Stock Exchange (HoSE) while the Hanoi Stock Exchange (HNX) will focus on the bond and derivatives markets, according to the new plan.

The report also revealed that a scheme to restructure and strategically develop the stock market during the 2016-2020 period is being implemented. “As at the end of June, stock market capitalization had risen 29 per cent since the end of last year, equal to 55.8 per cent of GDP,” the finance ministry noted in its report.

Meanwhile, a recent report from RongViet Securities (VDSC) showed that foreign investors posted net buying of VND9.2 trillion ($404.9 million) in the first half of 2017, surpassing the record VND8 trillion ($352.1 million) set in the first seven months of 2008.

This was a major improvement compared to foreign investors’ net selling of VND6.76 trillion ($297.5 million) in 2016, due to volatility in global stock markets and investors’ concerns over Brexit and new US policies under a Trump administration in the US.

Vietnam’s stock market has grown significantly since early this year, with the VN-Index on HoSE increasing 13-15 per cent and the HNX-Index on HNX rising 12 per cent compared to the end of 2016.

The country is working with Morgan Stanley Capital International (MSCI) on a stock market upgrade, with Vietnam currently maintaining its lead among three countries in MSCI’s Frontier Markets Asia Index.

But while Vietnam can satisfy criteria on market scale and the number of businesses with capitalization in the billions of dollars and market liquidity, the country still needs to deal with certain problems regarding requirements on market transparency, including information releases in English.

Vietnam has been improving the issues, guiding businesses, especially those in the VN30 group, to help foreign investors better access information.

The government has issued a decree on corporate governance that helps shareholders and Board of Directors at enterprises operate more effectively. The openness of the market will also be a decisive factor in determining if the market can be upgraded to emerging market status.

As for businesses operating in fields where the State needs to set limitations, shareholders’ general meetings can make decisions on the extent of any loosening.

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