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Vietnam is preparing a set of measures to support its stock market after a sharp decline triggered by global tensions linked to the Iran war. Proposals include creating a government-backed stabilisation fund, easing share buybacks, tightening trading limits and using influencers to improve investor sentiment. Authorities have been asked to act on these recommendations, though the extent of implementation is unclear. The move also aims to secure an upgrade by FTSE Russell and support the real estate sector. Regional peers are taking similar steps as market volatility and currency pressures continue to impact Asian economies.
Vietnam is planning steps to stabilise its stock market after a steep fall in share prices linked to global tensions arising from the Iran war, according to documents reviewed by Reuters. Advertisement
A proposal submitted in the past week by the Ministry of Public Security to Prime Minister Pham Minh Chinh suggested setting up a government-backed stock market stabilisation fund. The plan also included encouraging corporate share buybacks through incentives, narrowing daily trading limits and using influencers to promote positive messaging about the market.
The proposals followed a 6.5 per cent fall in Vietnam's benchmark stock index on March 9. The decline continued through the month, with the index dropping 9.3 per cent, making it one of the weakest performers in Asia during this period. Concerns over fuel supply disruptions and broader economic impact have affected investor sentiment, as Vietnam relies heavily on oil imports from the Gulf region.
Authorities were directed in the past week to review and act on these recommendations, with instructions issued to the finance ministry and the central bank. However, it remains unclear how many of these proposals will be implemented.
The market showed a slight recovery, closing about 0.5 per cent lower, after reports of these possible interventions emerged.
The developments reflect a broader trend across Asia, where governments are stepping in to stabilise markets. South Korea recently announced a bond buyback programme worth about USD 3.3 billion, while several central banks in the region have taken measures to support weakening currencies.
The Ministry of Public Security, which prepared the proposal, stated that the recent fall in stock prices was an excessively negative reaction by investors and indicated the need for market restructuring. Although the ministry does not directly handle financial policy, its influence has increased after its former head, To Lam, became the Communist Party's secretary general in 2024.
The proposed stabilisation fund would intervene during heavy selloffs by purchasing shares, with funding expected to come from taxes and fees on securities transactions. However, sources indicated that the size of the fund may remain limited due to restrictions on the use of public funds.
Additional measures include providing tax and fee exemptions to companies undertaking share buybacks and to investment funds purchasing stocks during downturns. The proposal also suggested increasing the margin lending limits for brokers to 7-10 per cent of their capital, compared to the current 5 per cent.
To manage volatility, the ministry recommended tightening daily trading bands to 3-5 per cent from the current 7-10 per cent and temporarily suspending trading during periods of extreme selling.
The document also suggested that authorities should guide domestic media more closely and encourage influencers to share positive views about the market to maintain investor confidence during sensitive periods.
These measures come ahead of a key review by FTSE Russell scheduled for April 7, where Vietnam is expected to be considered for an upgrade from frontier to developing market status. The government is aiming to ensure that recent volatility does not affect this reclassification, which is seen as important for attracting global investment.
The proposals also highlighted risks to Vietnam's broader economic targets, including its goal of achieving 10 per cent annual growth by 2030. To support this, the central bank has been advised to study the possibility of lowering interest rates for the real estate sector, which remains a key driver of the country's economy.
Source Reuters
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