Brokers urge stock watchdog to diversify commodities
By Thuy Trieu - The Saigon Times Daily
HCMC – Several brokers joined the same chorus on Tuesday urging the State Securities Commission (SSC) to quickly issue regulations on diversifying products on the market so as to help increase attraction and liquidity for the local bourses.
Speaking at a seminar to review ten-year development of the southern exchange, stock brokers said the overly-prudent approach by the stock regulator has hindered the introduction of new products, and asked the commission to quickly allow them to provide more improved and derivative products.
Nhu Dinh Hoa, CEO of Bao Viet Securities Co., said that products on two securities exchanges are so poor at this time, and are mainly limited to stocks and fund units while bonds - mostly Government bonds - account for small proportion.
“The market needs diversified products to ensure investors’ benefits as well as increase its attraction,” Hoa said. He suggested the authority have guidance for securities companies to provide derivative products such as options or future contracts that would provide more tools for investors to protect themselves on the market.
The suggestion about derivative products is unlikely to be taken in the foreseeable future as even simpler trading practices have not been allowed on the market now.
For example, SSC still applies the T+4 trading method, and has not allowed for same-day trading of stocks despite repeated proposals. T+4 practice means shares will be delivered to the buyer’s account four days after the transaction. The watchdog has also not allowed one investor to open many accounts at many securities companies.
At this time, the State Securities Commission has researched to allow for T+2 trading but this trial operation has faced trouble regarding the technology at Vietnam Depository Center and BIDV, which is in charge of making payments for the stock market.
However, brokers at the seminar said that the watchdog just needed to permit them to provide short selling, or selling shares before they arrive to accounts, while the payment time can still be kept at T+3.
Nguyen Van Dung, CEO of Tan Viet Securities Co., said that most professional investors have not entered the local stock market because the market had yet brought profits as high as they expected.
If Vietnam allows investors to buy and sell one stock type in the same day, that will be big chance for investors to earn profits, he said.
“Given the trading band of 5%-7% in Vietnam markets, right investment decision can generate a profit of 10%-14% in one day, which is very attractive to lure professional investors, contributing to the market’s development,” Dung said.
Allowing investors to buy and sell one stock type in a session will help to minimize risks for investors because the biggest loss they may incur will be 7% in the case of a wrong decision, while it is up to 28% at this time as they have to wait for shares arriving to accounts four days later. Besides, this would help increase the market’s liquidity strongly, he said.
In addition, Dung also suggested the State Securities Commission to ask the Ministry of Finance for guidance to let securities companies lend shares to investors to sell as this has been permitted in the Law of Securities. If brokers can perform this operation, that will help to restrict share speculation, he added.
Nguyen Doan Hung, vice chairman of the State Securities Commission, said that the market’s development scheme should allow securities companies to provide such products.
However, the authority must look at the development of the market to decide a right time. “We can not be so hasty in this issue,” he said.
After ten years of development, Vietnam now has two stock exchanges with 560 listed companies and total market capitalization at about VND700 trillion, accounting for 40% of the country’s gross domestic products.
In addition, there is a Government bonds trading system run by Hanoi Stock Exchange since September 2009 with the current size of VND140 trillion. The Hanoi exchange has been appointed to run the market for unlisted public companies (UPCoM) since June last year and now there are 78 companies floating shares on this market.