Vietnam’s capital markets have been in the headlines in recent months, and not always for the right reasons. In the two years since March 2020, Vietnam’s benchmark MSCI Index had more than doubled. But then came a spate of high-profile arrests, starting with billionaire Trinh Van Quyet, and rounding up top stockbrokers, property developers and even regulators.

Reuters reported that these caused a $40-billion wipeout for Vietnamese stocks and rattled investor confidence at a time when they were already spooked by fast-rising U.S. rates, as well as the Ukraine war and other geopolitical tensions. However, there are indications that this could be a temporary blip. Craig Martin, executive chairman of Vietnam-focused fund manager Dynam Capital, told Reuters that while he expects future scrutiny and caution on developers and property deals, the country’s growth is set to stay intact.

These steps are not the only ones being taken by the government to make investing in Vietnam’s markets more alluring. According to Benjamin Yap, senior partner at RHTLaw Vietnam, the government is also attempting to perfect the legal system with recently issued legal documents such as the “amended decree on administrative violations in securities sector, which came to effect on Jan. 1, the decree on private placement and corporate bond and many more instructions from the Government on supervision and investigation for close control.”

Infrastructure is another priority, specifically “efficient and secure transactions and payments,” says Yap. “The market needs a platform to collect and share information in a timely and reliable manner, including information about stocks, businesses, prices and transactions, etc. That makes the market more transparent; and is a necessary condition for the market to function effectively. For the corporate bond market, the rating agency is an important part of the information infrastructure. Credit rating should be promoted in Vietnam,” he notes.

The government, says Yap, is “urgently implementing and assessing issues and shortcomings in securities law provisions” to guiding documents, including across umbrella laws such as the Law on Securities.

“The Law on Securities is the highest legal document that consolidates market operators. This will be the foundation for launching new products, opening the door to upgrade the market,” he says.

Simultaneously the government is continuing to implement its Stock Market Restructuring Project.

“In the coming time, the government will direct functional units to implement plans to inspect and super-vice public companies, securities trading organizations, and auditing companies whose clients have financial statements whether there is any deviation or error in accordance with the approved plan. It is thus foreseeable from the above that the government is attempting to better the legal system with focus on supervision and inspection of listed companies for transparent transaction so as to protect investors and create a competitive capital market environment,” says Yap.

The regulatory changes, he says, also focus on information disclosure obligations from listed companies.

“The government is working on figuring out solutions to prevent listed companies from trading shares without disclosing information before trading, proposing solutions to technical blocking, as well as proposing amendments to relevant regulations on trading,” he says.

As the government focuses on refining the legislation and processes, Yap says potential advantages for Vietnam include stable development of the country’s capital market and a stable macroeconomic situation and the approval of the economic stimulus package. But he says more needs to be done in order to achieve this including “solutions for the new information technology system. Particularly, T+0 day trading mechanism.”

While the ambition is exciting, Yap concedes the Vietnam market is still relatively young, and as a result “mistakes are likely to happen but what is more important is how Vietnam can learn from the same and develop in the future. The investors may see that the government is trying to improve the legal system and also the mechanism of the capital market for transparency transaction environment,” says Yap, noting that while it has not been officially recognised as an emerging market, “the domestic market has achieved many criteria such as liquidity surpassing that of many other emerging markets in 2021, ranking only second in ASEAN after Thailand.”

“Many large funds in the world specialising in investing in emerging markets have also begun to show up in Vietnam,” he says.