Morgan Stanley Capital International (MSCI) has just announced its results of 2018 market classification for 84 stock markets around the world. According to this result, Vietnam was not included in the watchlist to be upgraded, which has disappointed investors.
Vo Tri Thanh, former vice president of the Central Institute for Economic Management (CIEM), previously said that Vietnam only has possibility of becoming "the emerging market" successfully of 25 per cent.
He showed that there are three reasons why it is difficult for Vietnam to meet MSCI's upgrading criteria.
The first is that the disclosure of information must be in English. Thanh said that this factor is very difficult for Vietnamese enterprises, especially for small and medium ones. This difficulty is not only the capacity of Vietnam companies but also its resources and costs.
The second factor is the participation of foreign investors or the degree of openness to foreign investors.
The third is the level of ease of capital transfer. The former vice president of CIEM said that this is the most difficult factor in Vietnam. In 2000, Vietnam set a target in the next ten years, VND became to have convertible currency but until now, the target can be said is not done yet.
On latest MSCI Global Market Accessibility Review published on June 2018, Vietnam has only one indicator upgraded that is market entry showing the investor registration and account set up.
It said that the use of online registration service in Vietnam has simplified and shortened the time for the issuance of Securities Trading Code. Registration is mandatory and account setup requires the approval of the Vietnam Securities Depository (VSD)
Most of reviewed items such as market regulations, foreign room level and information flow are not different compared to the last year’s ones. For example, not all regulations can be found in English; the equity market is significantly impacted by foreign room issues; stock market information is not always disclosed in English and occasionally is not detailed enough.
Besides, more information on the stock exchanges and the VSD websites can now be found in English. However, some company related information is not always readily available in English.
In addition, the rights of foreign investors are limited as a result of the stringent foreign ownership limits imposed.
Based on MSCI’s announcement, it will include the MSCI Saudi Arabia Index in its Emerging Market Index, reclassify Argentina to Emerging Markets status and consult on the potential reclassification of the MSCI Kuwait Index to Emerging Markets status.