JOURNALIST: - Sir, after 20 years of operations of HOSE can you generalize the capital mobilization of the listed enterprises?
Mr. LE HAI TRA: - Up until 30 June 2020, HOSE has 380 listed stocks, 3 closed fund certificates, 4 ETF fund certificates, 43 bonds and 76 guaranteed warrants. The total market capitalization of the stock market was nearly VND 2,800,000 bn, accounting for about 90% of the market capitalization of the national stock market, which is equivalent to 47% of the GDP. Currently there are 74 member companies with more than 2.4 mn investor accounts at HOSE.
The listed enterprises on HOSE are run by industry leaders with large companies that have stable business growth. The three sectors with the highest proportion in investment are in finance, real estate and essential consumer market, which account for about 80% of all market capitalization. There are also 23 enterprises with market capitalization of around USD 1 bn, which includes ten banks, and which also confirms the important role and position of HOSE in attracting listing and trading of large enterprises. According to the General Department of Taxation, in 2019, among the top ten companies paying the most taxes, five were listed on HOSE, namely, PV Gas (GAS), Vietcombank (VCB), Techcombank (TCB), Vinamilk (VNM), and BIDV (BID).
Since the listing, businesses have mobilized significant capital to serve production and business activities. The total value of mobilized capital via additional issuance in the stock market since 2000 has been estimated at about VND 295,000 bn, with 834 issuances. Particularly in the period of economic restructuring in 2010 to 2015, the mobilization rate increased by around five times compared to the previous years. The listed enterprises on HOSE have increased chartered capital after listing on the stock market, in which a number of businesses have a higher increase in charter capital, such as Vingroup (VIC) has increased by 43 times, VCB has increased by 33 times, and VNM has increased 11 times. Capital mobilized through the stock market helps businesses improve their financial capacity, invest in new projects, expand production and businesses, and also increase competitiveness and operational efficiency.
During the last 20 years, HOSE has implemented a series of technical solutions on trading and product diversification. It is worth noting that the continuous execution of orders in 2007, online transactions in 2009, extended trading time and market orders in 2012, applied new listing units with maximum price of VND 10 per share in 2016, all greatly improved the liquidity in the market. HOSE also focused on solutions to develop the basic stock market soon after starting with two stock listings in July 2000, followed by Government bonds in August 2000 and Corporate bonds in November 2000.
The structure of listed products on HOSE are closer to the international trend, as it continues to develop and list advanced structured products such as portfolio-listing fund certificates. For example, VFM VN30 ETF was listed and traded first on HOSE in 2014, followed by SSIAM VNX50 ETF listed in 2017, while SSIAM VNFinLead ETF and VFM VNDiamond ETF listing in 2020 helped to improve the product structure and diversify investment options in the market with increased liquidity in the base market.
- Sir, besides the achieved results in the last 20 years, is the stock market still limited?
- Vietnam's stock market is still young, and the distance from stock exchanges in the region is still quite far. The market capitalization of Vietnam is nearly one fifth of the Philippines market, one seventh that of Indonesia and one eighth that of Thailand. The size of the stock market capitalization on GDP is modest, while the capital market structure is still unbalanced. Developing fast and sustainably, and improving the competitiveness of market members, is a big challenge for HOSE and market members.
Liquidity in the market has improved but there are still existing factors that are not really sustainable. The trading value turnover is still low compared to other regional markets. The average daily turnover of the Vietnamese market has reached USD 180 mn, only equal to 1/9 of the Thai market, which is USD 1.5 bn, 1/5 of Singapore market at USD 864 mn, and 1/3 of Malaysia market at USD 244 mn.
The State holding rate in many SOEs is still large, making the liquidity of stock limited compared to the potential of enterprises. Foreign participation in the total transaction is also limited. The participation rate of foreign investors in the Vietnamese market according to the trading value is still low, and in the period 2010 to 2019, it reached between 12% to18%. The proportion of institutional investors is also not high. At the beginning of 2020, the proportion of individual investors accounted for 99.34%, but the number of foreign investors increased by only 1.45%.
The actual number of new products offered for sale and listed on the stock market are limited, still focusing on traditional products, which are stocks. Although corporate governance quality has improved, it is still a long distance from the regional market. The equitization and divestment of SOEs has been slow in recent years, affecting the supply of goods to the market. The lack of specific guidance on listing for Foreign Direct Investment (FDI) leads to the absence of FDI enterprises in the stock market. The unclear delimitation of the structure between the stock and bond market results has certain difficulties for both investors and market members.
- In your opinion, what breakthrough solutions are needed to accomplish the goal to making the stock market an important channel for providing capital to the economy?
- In order to achieve this goal in the immediate future, it is necessary to improve the apparatus, operational model and governance according to international practices, improve the organization and operation of the market, and support the establishment of Vietnam Stock Exchange according to the schedule and model approved by the Prime Minister as per Decision 32/QD-TTg.
Next, market segmentation must also be conducted according to the size, operational quality, liquidity, and product diversification in the stock market. Additionally, deploying new products from simple to complex, guaranteeing warrants on index of ETF, selling warrants of ETF types and depository certificates (DRs), while further developing the basic indices to serve as the basis assets for the derivatives market.
- Thank you very much.