In a recent talk with Saigon Investment, Mr. Ho Duc Phoc, Minister of Finance, expressed his many views on this crucial topic.
JOURNALIST: - Sir, it must be admitted that in 2022 the hot development of the stock market and the corporate bonds market exposed many risks, thereby creating insecurity in the capital market. How do you evaluate this situation and what is the solution you would recommend to rectifying this in 2023?
Mr. Ho Duc Phoc: - First of all, it must be acknowledged that in the past the Ministry of Finance actively introduced guidelines to policies of the Party, National Assembly, and the Government on capital market development, in order to open up medium and long-term capital sources for investment and development. As a result, the capital market and financial services have become more complete in terms of structure and scale and are now playing an important role in mobilizing resources to stabilize the macro-economy and grow a balance between the money market and capital market, as well as the stock market and the corporate bonds market.
The capital market had an average growth rate of around 28.5 percent per year in the period 2016 to 2021, and the stock market and corporate bonds market had a growth rate of around 30 percent per year in the period 2019 to 2021. This gradually narrowed the gap with the credit market.
By the end of 2022, the stock market had 758 stocks and fund certificates listed on two stock exchanges and 859 shares registered for trading on UPCOM, with a total listed value of VND 1,970,000 bln, an increase of 13.3 percent compared to the end of 2021, with nearly 6.8 million accounts, an increase of 57.7 percent compared to the end of 2021. The corporate bonds market plays an increasingly important role in the medium and long-term capital mobilization of the Government, banks, and enterprises with total accumulated capital mobilized in the first 11 months of 2022 reaching over VND 537,100 bln.
However, it is undeniable that since mid-2022 there have been many adverse fluctuations, such as in the stock index, and capitalization level had decreased by about 30 percent by the end of the year, with liquidity decreasing by about 20 percent compared to 2021. Enterprises now face great pressure in cash flow and liquidity. The main reason seems to be lack of investor confidence. In addition, some news media and false information about some businesses have also had a bad psychological impact on investors and the market.
In 2023, the Ministry of Finance is directing units and coordinating with other ministries and sectors to focus on implementing solutions to develop a transparent, sustainable, and efficient market. In particular, the Ministry of Finance will continue the task of perfecting mechanisms, policies, laws, and guiding documents to promptly overcome inadequacies and obstacles, thereby restoring confidence, and ensuring a healthy development in the market.
The Ministry of Finance will coordinate with other ministries and branches to report to the Government on amendment of Decree No. 65/2022/ND-CP, and accordingly it will be adjusted to suit the current conditions as well as current difficulties of the corporate bonds market. The State Securities Commission, Stock Exchanges, Securities Depository, and Clearing Corporations will operate synchronously in sharing information regarding the stock market, depository, and trading of corporate bonds, in order to develop a transparent and safe market, enhance management, and monitor capabilities to reduce risks.
- Sir, in 2023 the world economic situation is expected to show signs of instability which will affect the stock market. What is your opinion on this?
- During the last months of 2022 and early 2023, the US Federal Reserve (FED) and many central banks around the world continued to tighten monetary policy to bring rising inflation under control. The Vietnamese economy in general, and the stock market in particular, are forecast to continue to face many difficulties and challenges. For instance, the fact that countries such as the US and the EU are continuing to tighten monetary policies and raise interest rates can put pressure on pulling investment capital out of emerging and developing markets, including Vietnam. In the context of international tensions as well as increasing inflationary pressure, investors have turned to a more cautious sentiment for investing. These factors are all likely to affect cash flow and liquidity in the Vietnamese stock market.
However, in the long term, Vietnam's stock market still has growth potential as some positive factors continue to maintain. The Covid-19 pandemic was well controlled, the fundamental macro and large balance factors are under control, economic activities have been restored, domestic consumption is recovering, and international tourism activities have restarted. Business activities are still positive, although more difficult in the general context of the world economy. Many international organizations still highly appreciate the results and prospects of Vietnam's economic development in coming time.
The International Monetary Fund forecasts that Vietnam's real GDP growth is the highest in ASEAN, reaching 5.8 percent in 2023. In addition, the P/E index of Vietnam's stock market is currently at 10.2, lower than most other markets in the world. With these forecasts the operation of the stock market and corporate bonds market in 2023 will still face challenges but also many opportunities. In this, the challenge from internal factors of the economy and the market will play a major role. Therefore, the Ministry of Finance is determined that the key task in operating the stock market and corporate bonds market in 2023 and the following year is to ensure stability and transparency and protect the legitimate rights and interests of investors and other participants in the market.
- Sir, what are the specific solutions you would suggest in 2023?
- Firstly, we must perfect the legal and institutional framework. The Ministry of Finance is coordinating with the Ministry of Planning and Investment to review the overall provisions of the Law on Securities, Law on Enterprises, and other guiding documents to immediately overcome inadequacies and problems in the stock market. The Ministry of Finance will coordinate with other ministries and branches to report to the Government on the amendment of Decree No. 65 related to the issue of extensions, bonds, credit norms, and investors.
Secondly, the Ministry of Finance has stepped up supervision of trading activities on the basic stock market, derivatives market, and corporate bonds market. There will be timely sharing, providing information and reporting to competent authorities to promptly handle, prevent manipulation, and strengthen discipline in the market. The Ministry also calls for inspecting and supervising of service provision activities of securities companies.
Thirdly, the Ministry of Finance will rebuild investor confidence, and share timely information with the investors, help businesses and investors to feel secure in mobilizing and investing in the market. There will also be increased participation of institutions and professional investors to prioritize the development of long-term investments such as in investment funds, voluntary pension funds, and insurance enterprises.
Fourthly, the Ministry of Finance will develop a synchronous bonds market in two ways, namely, issuing bonds to the public, and issuing private bonds. For the public issuance channel, the Ministry will try to create favorable conditions for issuers, as well as direct the State Securities Commission to review and cut administrative procedures to create conditions for businesses to be eligible to issue and access all types of investors. For the private placement channel, the Ministry has issued instructions to enterprises to arrange all resources to pay the principal and interest of corporate bonds due in accordance with the provisions of law and protect the interests of investors. It is recommended that enterprises in case of difficulties and problems in payment must negotiate with investors to agree on a plan to restructure.
Fifthly, the Ministry calls to actively coordinate with international organizations to implement solutions to upgrade the Vietnamese stock market according to a set roadmap, in order to attract more participation from foreign investors to the Vietnamese market.
- Thank you very much.