Vietnam weighs state-backed stock stabilisation fund after war-driven sell-off

Vietnam is preparing measures to shore up its stock market, including a proposal to set up a government-backed stabilisation fund, after a sharp sell-off linked to the Iran war, according to documents seen by Reuters.

A March 17 proposal from the Ministry of Public Security to Prime Minister Pham Minh Chinh also listed other steps, such as offering incentives for corporate share buybacks, narrowing daily trading bands, and using influencers to spread positive messaging about the market.

The proposals followed a 6.5% drop in Vietnam’s benchmark VN-Index on March 9, the document said. Reuters reported the index fell 9.3% in March, making Vietnam one of Asia’s worst-performing equity markets as investors worried about fuel shortages and wider economic fallout, with Vietnam sourcing most of its oil from the Gulf.

In a separate document, Reuters said the prime minister’s office instructed the finance ministry and central bank on March 25 to act on the recommendations, though it remains unclear how many will be adopted.

Under the proposal, the stabilisation fund would buy shares during periods of heavy selling and would be financed using taxes and fees on securities transactions, Reuters reported. The document did not specify the fund’s size.

Reuters said the proposals included narrowing daily trading bands to 3-5%, from the current 7-10%, and even suggested temporarily halting trading for “a few sessions” during extreme sell-offs. The plan also called for higher caps on margin lending by brokers.

The moves come as Vietnam’s roughly US$300 billion stock market seeks an upgrade to “developing market” status from “frontier” classification by FTSE Russell, with a review due on April 7. Reuters said the proposals aim to reduce the risk that current volatility could delay the upgrade.