A Review of the Establishment of the Stock Market in Vietnam–In Relation to other Transitional Economies

This paper critically reviews the literature on the roles of privatisation and market regulations in establishing the stock markets in transitional economies, with the focus on the case of Vietnam. Privatisation, or equitisation in Vietnam, can provide promising candidates for the stock market but can by no means replace the well-established institutions which are crucial for its long-term development. The experience from Russia, Czech Republic, Poland and China had shown that the results of mass privatisation could be frustrated if there was little transparency and investor protection on the stock market. For Vietnam, ownership in equitised State-owned Enterprises was still concentrated with the Government and the insiders, posing various risks to minority shareholders. It then required the authority to strengthen the regulatory environment to improve investor confidence. However, enhancing regulations by imitating those of more advanced markets is not expected to bring desirable outcome for stock markets in less developed countries but instead they should focus on the ability to enforce those regulations. In Vietnam, disclosure requirements imposed on listed companies seemed to be comprehensive but not enforceable. This again reveals another drawback of the stock market in Vietnam that can disadvantage minority shareholders.