Capital market development helps raise confidence in investor protection

Despite this optimism, a number of solutions have also been proposed by various experts to accelerate the development of the Vietnamese capital market. In particular, it remains necessary to focus on solutions aimed at strengthening investor protection, thereby increasing confidence in the market, as well as its overall attractiveness for foreign financiers.

According to an assessment conducted by the Capital Market Working Group of the VBF, it can be viewed as essential to continue to improve the hardware and software infrastructure of the market.

The country boasts a solid legal system, although it still requires improvements to be made to ensure the consistency of legal provisions applicable to the debt and securities markets.

Dominic Scriven, head of the Capital Market Working Group, said that the development of the capital market is largely dependent on investor confidence, a factor which can only be built through improving transparency and fairness within the capital market.

He went on to underline the need to impose adequate sanctions for violations and implement investor protection mechanisms, especially within the Vietnamese market where there is a large participation of individual financiers that account for 93% of daily transactions.

Foreign investors also recommend that it is necessary to diversify their activities in the capital market, whilst also developing and calling for the involvement of others, such as pension funds, insurance companies, and professional investors.

Responding to the proposal made by the business community and international investors, Deputy Minister of Finance Nguyen Duc Chi affirmed, "The Ministry of Finance has built and completed the system of legal documents to ensure that the capital market, including the securities market can operate openly and transparently as a way of strengthening the protection of investors' interests.”

The Vietnamese capital market can be seen to be developing strongly and positively. An important element in the future will be the close co-ordination of investors, individuals, market members, and relevant State management agencies. In line with this, the capital market will develop more rapidly, thereby meeting expectations of investors as well as the business community as a whole.

According to the capital market working group of the VBF, the nation’s total market capitalization stands at approximately US$340 billion, equivalent to 100% of GDP, thereby exceeding the target set by the Government. In 2021, the number of new securities investment accounts entering the market increased by 56%, equivalent to 1.5 million individuals making their first ever investment in the market, with considering this to be a channel to accumulate assets.

However, Scriven believes that although Vietnam boasts a remarkably open economy, the participation of international investors in the nation’s capital market remains quite low compared to what the country can achieve.

He went on to suggest resolving all problems in attracting foreign investors' participation by making concerted efforts and accelerating the transformation of Ho Chi Minh City to become a financial hub of the region. This should be done while finding areas which hold competitive advantages over regional rivals such as Hong Kong (China) and Singapore.