Vietnam works towards closer ASEAN market integration

“Countries in the 10-member bloc, of which Vietnam is a member, have been working towards a more integrated capital market for the region, which is home to about 620 million people,” said Minister of Finance Dinh Tien Dung.

Now it’s time for Vietnam to catch up with others such as Singapore, Malaysia and Thailand that have been putting in place for a number of years an ASEAN Trading Link, involving the use of what is called an electronic “order routing” system.

The more advanced system provided by technology group Sungard, allows, for example, brokers in Malaysia and Singapore to connect their clients more easily to trading on each other’s local capital market exchanges.

E-system allows for example, an investor in Malaysia wanting to trade shares in Singapore to place the order directly, in lieu of the of the fashioned was of having the Malaysian broker physically call and make personal contact with the Singaporean broker.

“This personal contact approach is simply too cumbersome, time-consuming and results in substantially more fees and expenses for investors,” said Minister of Finance Dung.

The financial markets and entire banking system for that matter needs to concentrate on lowering barriers for foreign businesses and investors wishing to engage in doing business in Vietnam in particular and ASEAN in general.

Many expert financial analysts have suggested that the lack of development and modernized of financial services, he said, is holding back large numbers of participants from engaging in trading on any scale in local businesses stocks and bonds.

Out own Ministry of Finance experts are advising me that progress on ASEAN financial integration has been “disappointing” to date and lags far behind countries like Malaysia and Singapore in its efforts to integrate trading markets within the region.

He suggests that member countries should build on the ASEAN Trading Link “by further broadening and deepening post-trade linkages”.

This involves a rather large amount of work to establish clearing, settlement and custody links that would make the ASEAN Trading Link a “full-fledged end-to-end platform across all of the ASEAN markets”, he said.

Vietnam currently has its own clearing and settlement systems but there are no formal and clearly established links with other capital markets in ASEAN.

It’s critically important for traders in the Vietnam market to have access to post-trade infrastructure linkage allowing investors in Vietnam to access Hong Kong and Shanghai markets, allowing them to trade on each other’s markets.

Complex post-trade arrangements have made life difficult for foreigners trying to participate in the Vietnam’s market, notes the Minister, and over the next couple of years it’s a major undertaking that must be done as it is taking its toll on integration.

Coordinating the markets and reducing the settlement time market participants need to adjust operational schedules along with upgrading the front and back office systems of those in the industry is critically important to the nation’s financial health, said the Minister.

Over the next few years, as cross-border trading increases within the region, Dung said, market participants will need to ensure their post-trade systems and operations can scale to meet increased volumes and that best practice is employed to minimize operational risk.