HANOI: Vietnam is set to officially launch a central counterparty mechanism in early 2027 as part of its push to be reclassified as an emerging market as early as this year and attract more foreign investors, the State Securities Commission said.
Vietnam has been on global index provider FTSE Russell's watchlist for an upgrade since 2018. It is currently classed as a frontier market, limiting the investment it can attract from funds, investors, and family offices in the nation's listed companies.
An upgrade to emerging market status could rapidly channel US$5 billion into Vietnam's financial markets, according to World Bank estimates.
The government released a four-phase plan running through 2027 to secure the upgrade during a visit to Hanoi by FTSE Russell's global head of equity and multi-asset, Gerald Toledano.
The roadmap includes finalising the legal framework and establishing a Central Counterparty-operating subsidiary under the Vietnam Securities Depository and Clearing Corporation.
In a meeting with Toledano late on Thursday, Prime Minister Pham Minh Chinh (pic) expressed his hope FTSE would support a classification upgrade for Vietnam, state-broadcaster Voice of Vietnam reported.
Toledano highlighted Vietnam's strong liquidity, which he said surpassed regional peers Thailand and Singapore, VOV added.
Vietnam's financial markets are small in comparison with regional peers. As of Thursday's close, the main benchmark stock index had a market valuation of around $245 billion, compared to around $455 billion for the main Thai index and around $490 billion for Singapore's STI Index, LSEG data showed.
The CCP will act as an intermediary between buyers and sellers in the equity market, ensuring trades are honoured even if one party defaults.
The country has already introduced other measures, such as a new transaction settlement system and the removal of a requirement for overseas investors to fully pre-fund equity trades, to address obstacles to its potential reclassification.
Foreign investors have increased purchases of Vietnamese stocks following the announcement of a trade agreement between the United States and Vietnam.
The benchmark VN-Index has risen 7.22% so far this month. FTSE Russell is set to release a review in September.
If Vietnam secures the upgrade to secondary emerging market status, the reclassification process could take six to 12 months, consistent with the agency's procedural guidelines.
Vietnam had previously targeted 2025 for achieving the upgrade. - Reuters
