VN Index exceeds 8-year peak, but stays among frontier markets


VietNamNet Bridge – The Vietnamese stock market has been hot these days with the VN Index breaking new records. However, it is still far below other frontier markets in the region.

Everyone felt the heat of the stock market in recent days. The VN Index climbed to a new peak – one-year-peak, 2-year-peak and 8-year-peak – when the trading session finished. 
With the investors’ excitement and capital flow, it seems that all investors can make profits if they buy stocks now.
Analysts commented that securities are the best investment channel this year. The stock market has become much more attractive after the VN Index exceeded the 640 point threshold.

While the capital flow from foreign investors is weak, experts believe that the main capital flow in the stock market at this moment is from domestic investors.
They said that cash flow to bank deposits and real estate markets had slowed as investors find investment channels less attractive. This is a reason why they have shifted to invest in securities.

However, despite the increased heat in the stock market, the Vietnamese stock market is still among frontier markets. The conclusion was shown on the report about Vietnam’s opportunities to be upgraded into an emerging market which has been released by Bao Viet Securities.The report cited the MSCI’s ranking about the typical markets representing three major groups – developed markets, emerging and frontier. The countries include Singapore, Qatar, UAE, Thailand, Indonesia, the Philippines, Argentina, Bangladesh and Vietnam.

Among frontier markets, which include Argentina, Bangladesh and Vietnam, Vietnam is the only country to stay in this group the next year, while the other two countries will be upgraded into emerging in June 2017.
Of the 18 criteria referred to when classifying markets, Vietnam can only satisfy five requirements and it ‘needs to upgrade’ in 10 criteria.
The criteria that Vietnam needs to improve include: freedom in the foreign exchange market, securities lending and short-selling.Bao Viet Securities thinks these are difficult issues for Vietnam. 

Meanwhile, other countries, including Thailand, Indonesia and the Philippines, can satisfy more requirements than Vietnam. Singapore, for example, can satisfy all the 18 requirements set by MSCI.
Big gaps can also be found when comparing Vietnam with the markets on the same par such as Bangladesh and Argentina.
MSCI still lists Vietnam among frontier markets that have problems that need to be resolved to move into the emerging market group. 

As such, the efforts by the State Securities Commission (SSC) to get MSCI recognition for Vietnam as an emerging market have not brought the desired effects.


Photo: CBR Investment AG