Even if the market is upgraded after satisfying technical criteria and attracting huge amounts of foreign investment, it cannot secure sustainable development if irregularities like insider trading, stock manipulation, and unequal access to information are not rooted out, and listed firms still aim for a quick buck.

Short term pressure? On June 23, the State Securities Commission (SSC) announced that investigative police have pressed charges of stock manipulation against three companies related to APEC Group, namely APEC Securities, APEC Investment, and IDJ Investment. Upon the news, the stock market has seen shares of the three companies crashing to the floor, with panic selling and little buying interest. On the same day, the police prosecuted 15 more people for allegedly assisting former FLC chairman Trinh Van Quyet and some others in manipulating stock prices. The bad news, however, has not sent shock waves through the stock market, as the benchmark VN-Index has still earned points. It should be noted that more than one year ago the stock market witnessed a sharp plunge when the then board chairman of FLC was prosecuted. The question now is whether investors have now turned a deaf ear to sensational, negative news. Regarding the APEC Group-related stocks, SSC said this is a singular case related to a number of organizations and individuals on the market, and the stock market has been performing in a stable and normal manner. Investors are advised to stay calm and avoid psychological factors that can lead to a panic. Despite the assurance, actions to deal with irregularities on the stock market are still being taken, which can impede the market development under the current sensitive situation when concerns are still there over who or which enterprise can be implicated next for similar irregularities. In reality, several stocks under certain cross-ownership groups have come under selling pressure in recent days. Furthermore, signals are emerging that the stock market is entering a turbulent period after a winning streak spanning two months. Although the VN-Index has rallied by 10%, many stocks have made big jumps, which may prompt investors to lock in profits and send the index down. The current resistance level now hovers around 1,200 points for the VN-Index, while the nearest support level is around 1,070-1,080 points. That foreign investors have maintained net share sales since the middle of June despite the State Bank of Vietnam’s back-to-back policy rate cuts has also cast a shadow over the market. The World Bank has recently advised the SBV to take caution when loosening its monetary policy since such a stance may exert pressure on the capital flow and the forex rate now that many central banks in the world have continued tightening their monetary policies. However, any fluctuations on bourse will probably be short-lived due to improving macroeconomic conditions induced by accommodative fiscal and monetary policies. Such developments will incentivize the market in the long term. In addition, as capital is being drained from bank deposits due to lower interest rates, it will likely flow onto the stock market, and market fluctuations are expected to help speed up the capital inflow. For long-term goals Any policy always has a lag time. The efficacy of the loosened fiscal and monetary policies is expected to come later. Many investors are now upbeat about the market growth later this year and next. Therefore, they are bracing for such developments, making the most of market fluctuations. Near-term support factors for the market are coming when listed firms are about to release their reports on business performance for the second quarter and the first half, with profits expected to bounce back strongly after bottoming out in the first quarter, now that lending rates have been reduced substantially, benefiting many enterprises and industries. In another development, according to a report on market ratings released by MSCI in late June, Vietnam’s bourse status has stayed put as it had not been listed for upgrade from a frontier market to an emerging one. This is not a surprise, as MSCI’s view on Vietnam has not changed since last year. Earlier, in its April assessment, FTSE Russell also kept Vietnam’s stock market unchanged as a frontier market and was added to the watch list in September 2018 for possible reclassification to secondary emerging market status. However, unlike MSCI, FTSE Russell observed certain activities that Vietnam had undertaken in recent times, such as discussions for solutions to the market development between management agencies and market stakeholders, the test run of the new transactions system, and the plan to launch the non-voting deposit receipt. The Vietnamese stock market will have to pass a rocky road before any upgrade of its status can be considered, especially in relation to MSCI criteria. The domestic market is still full of restrictions, especially the issues of transparency, the capacity to deter insider trading and stock price manipulation, equal access to information, and protection of individual investors. Therefore, it is imperative to clean up the market for long-term development goals. According to the SSC, stronger efforts to penalize violators – individuals and organizations alike – on the stock market are among measures by management agencies to improve the regulatory environment and support the market growth in terms of transparency and sustainability. In the long term, despite numerous challenges, it is expected that the domestic market will continue expanding in a stable and transparent manner. In reality, in more than one year, competent authorities have got tougher against stock price manipulators, from the sensational case of FLC to those related to Louis stocks and now APEC Group-related stocks. In addition, many officials with the SSC have also been disciplined for their dereliction of duty, hindering the healthy development of the market and giving rise to irregularities. It is apparent that even if the market is upgraded after satisfying technical criteria and attracting huge inflows of foreign investment, it cannot secure sustainable development if irregularities like insider trading, stock manipulation, and unequal access to information are not rooted out, and listed firms still aim for a quick buck. The confidence will be eroded, and investors, foreign and local alike, can hardly stay on for the long term.