Grow stock market to ease pressure on the money market
Too much dependence on credit to boost the economy is not the safe path.
The importance of the stock and bond markets in mobilising capital for enterprises and the economy was once again highlighted at a conference organised by the Securities Journalists Club on Wednesday morning.
If an economy relies on bank credit to grow, it will pose many risks, as bank capital is short-term while the demand for medium- and long-term loans is large, Phạm Chí Quang, Director General of the Monetary Policy Department under the State Bank of Vietnam (SBV), said at the event called "July Talks: Macroeconomics and the Stock Market."
"Việt Nam’s credit-to-GDP ratio is currently at 126 per cent, the highest among developing countries. Too much dependence on credit to boost the economy is not a safe path," Quang said, adding that it is necessary to focus on developing other safe capital channels such as the stock market and corporate bond market.
Similarly, Nguyễn Quốc Hùng, General Secretary of the Bankers Association, said that that the growth of the stock market will assist to relieve pressure on the money market, alleviating the load on the banking system in terms of capital for the economy and enterprises.
Regarding the potential upgrade of the country’s stock market from a frontier to an emerging market, Vũ Thị Chân Phương, Chairwoman of the State Securities Commission (SSC), stated that the Commission is focusing on finding positive solutions and overcoming the criteria set by credit rating agencies.
The upgrade requires coordination with ministries and sectors, she said.
"The SSC has held many meetings with related parties to solve difficulties. At the end of August, we will hold a seminar in Hong Kong to work with rating agencies to assess the possibility of being ranked as an emerging market", Phương said.
According to the International Monetary Fund (IMF), about 70 per cent of capital allocation decisions for securities depend on the stock market classification.
As a result, once the stock market is upgraded, around US$7.2 billion will flow into Việt Nam each year.
Moreover, the upgrading improves the capacity to evaluate equities, which has a good impact on the equitisation and divestment of state capital.
"The upgrade to emerging market status also leads to more diversified investors. We now have to restructure the investor base, when up to 90 per cent are retail investors", Phương said.
Continuing to recovery
Major stock markets are recovering relatively positively, with the US market having rebounded about 20-25 per cent, Cấn Văn Lực, a member of the National Monetary and Financial Policy Advisory Council, told Việt Nam News.
In Việt Nam, the market benchmark index also recovered, with a 17 per cent increase over the end of last year.
The recovery is attributed to the ease of global inflation and interest rates, said Lực.
"Inflation fell more sharply than expected by economists," he said.
In addition, the financial-monetary market has faced several challenges this year but remains mostly under control, while the global economic crisis is primarily a technical recession and is milder than previously predicted.
“Therefore, I believe the recovery will continue, but growth will be slower as many positive factors have already been reflected in prices in the first half of the year,” Lực noted.
In the domestic market, many industries have shown signs of recovery since the beginning of the year and may continue to drive development in the future.
On Wednesday, the VN-Index extended its rally, breaching the threshold of 1,200 points for the first time since September 23, 2022. The VN-Index finished at 1,200.84 points, up 0.41 per cent. — VNS
