HANOI, April 2 (Reuters) – Vietnam is planning measures to support its stock market and has proposed the creation of a government-backed stability fund, following a sharp drop in prices due to the Iran war, according to documents seen by Reuters.
Other possible actions listed in a March 17 proposal by the Ministry of Public Security to Prime Minister Pham Minh Chinh include incentives for buying shares, reducing daily trading groups and using influencers to promote positive messages.
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The Prime Minister’s Office instructed the finance ministry and central bank on March 25 to act on the recommendations, according to a separate document. However, it was not clear to what extent the recommendations would be adopted.
The contents of the documents were first reported by Reuters.
None of the ministries or government agencies mentioned in the article immediately responded to requests for comment.
A POLICE OFFICER LEAVES
The index finished 0.5% lower on Thursday, paring some losses after Reuters reported the proposals.
The proposed measures highlight the growing challenge Asian economies face in protecting their financial markets during the turmoil of war.
The sharp drop in Vietnam’s stocks is an “extremely negative reaction from investors that requires a restructuring of the market,” according to a document from the ministry in charge of the police.
The ministry is not responsible for economic or financial policy, but it has had a strong influence since its first head, To Lam, became secretary general of the ruling Communist Party in 2024, the most powerful party in the country.
TRADING CURBS AND MEDIA CONTROL
Vietnam’s stock market, worth about $300 billion, is widely expected to be classified as an emerging market from “frontier” status by index provider FTSE Russell in a review due on April 7.
The proposed measures are aimed at reducing the risk that the current market instability may delay the improvement of its market position, said the document.
“The proposed stock market stabilization fund would buy shares during periods of heavy selling and be supported by taxes and fees on stock sales, the Ministry’s document said. It did not say how big the fund would be.”
The fund could be limited in size because of Vietnam’s restrictions on the use of public money, said a person familiar with the proposal who declined to be identified as the plan has not been made public.
The purchase of shares can be facilitated by exemptions from taxes and fees, and similar exemptions should be applied to investment funds that buy shares during market downturns, the document said.
It encouraged the use of influencers to spread “good news” about the market and called for strong media guidance – already under government control – to ensure public opinion during the financial crisis.
It also proposed reducing daily trading margins to 3–5% from the current 7–10% and proposed temporarily suspending trading for “several shares” during extreme selloffs.
The ministry has also asked for an increase in the margins for brokers offering online loans to investors, allowing them to lend up to 7-10% of their capital, as opposed to the current limit of 5%.
Noting the risks to the party’s goal of annual growth of 10% until 2030, the document also encouraged the central bank to “enrich itself with a reduction” in interest rates for the real estate sector, which is a major driver of economic growth.
($1 = 1,520.0000 won)
Reported by Francesco Guarascio; Additional reporting by Ankur Banerjee from Singapore; Edited by Edwina Gibbs
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