Modernizing Vietnam's Stock Market: The KRX System Rollout
Market activity currently at high levels
The rollout of the KRX system in Vietnam's stock market is a significant milestone, marking a decade-long effort to modernize and enhance the competitiveness, efficiency, and stability of the country's financial market infrastructure [1][3].
The KRX system, managed by the Ho Chi Minh Stock Exchange (HSX), is designed to boost trading efficiency, reduce settlement time, and support a wider range of products in line with international standards. The system connects the trading platform, registration, clearing, and settlement processes across the market's key entities, ensuring smooth operations without major errors after initial launch [1].
Improved Market Efficiency and Liquidity
The KRX system supports new trading mechanisms such as day trading and noon trading sessions, giving investors more trading time and reducing order congestion at market open—features aligned with international best practices [1]. This has contributed to Vietnam's stock market leading Southeast Asia in liquidity measured over 10 trading sessions, which is a vital indicator for attracting global investors [2].
Foundation for Market Upgrade and Reforms
The system underpins key reforms like non-prefunding transaction solutions and is a stepping stone toward implementing a central counterparty clearing (CCP) mechanism by 2027, which is critical for Vietnam's upgrade from a frontier to an emerging market [2][4].
The CCP will act as an intermediary between buyers and sellers, ensuring securities trades complete smoothly even if one party defaults. This will reduce settlement risk, improve payment safety, enable better cross-market risk control, and consequently boost overall financial stability in Vietnam [4][5].
Attraction of Foreign Investment
By aligning Vietnam’s trading systems and clearing mechanisms with international standards, the KRX system and associated reforms improve the market's attractiveness to foreign investors [2][3][5].
Market Dominance and Growth
The financial and real estate sectors currently dominate the market, accounting for about 60% of market capitalization. The capital market has become one of the three pillars of Vietnam's financial system, alongside banking and insurance [6].
The average daily trading value in the first half of 2023 surpassed $840 million, positioning Vietnam among the most active markets in ASEAN in both capitalization and liquidity [7]. The VN-Index is nearing 1,500 points, its highest in three years, and market capitalization has reached nearly $308 billion, about 70% of 2024's GDP, with over 10.3 million investor accounts [8].
The Need for More High-Quality Listings
However, concerns have been raised about the lack of major new listings since 2019, as no standout initial public offering has catalyzed breakthrough momentum [9]. There is a call for more high-quality listings from advanced manufacturing and tech to better reflect the real structure of the economy [10].
Collaboration for Mutual Growth
Comparisons have been made between Vietnam's market and those of South Korea and Singapore, with a call for Vietnam to accelerate public listings, equitise state-owned firms, and diversify investment products [11]. Depository receipts for Vietnamese shares have already been issued in Thailand, and the Vietnam Exchange (VNX) will deepen cooperation with the Singapore Exchange (SGX) to share best practices and co-develop such receipts for listing in Singapore [12].
The Legacy and Forward Momentum
Minister of Finance Nguyen Van Thang declared July 28 as a pivotal moment, symbolizing the legacy and forward momentum of the Ho Chi Minh Stock Exchange (HSX), which commenced operations on July 28, 25 years ago, marking the birth of Vietnam's stock market [13].
The SSC held a workshop on risk management for securities companies to bolster legal awareness and operational resilience [14]. The minister emphasized the financial sector's heavy responsibilities in achieving the major goals set by the Party and government [15].
In summary, the KRX system rollout is a cornerstone in modernizing Vietnam's stock market infrastructure, enabling increased liquidity, risk mitigation, and investor confidence critical for the market’s transition to emerging-market status and long-term growth of the country's financial system [1][2][4].
- The KRX system, by supporting new trading mechanisms and alignment with international standards, is expected to attract more foreign investors to Vietnam's stock market.
- The rollout of the KRX system and the implementation of a central counterparty clearing (CCP) mechanism are crucial steps in Vietnam's transformation from a frontier to an emerging market, boosting overall financial stability and market competitiveness.
