New reforms get markets jumping

Stock market analysts are excited by the government’s new packet of reforms

The Ministry of Finance’s Circular 74/2011-TT-BTC, which comes into force on August 1, allows investors to open accounts at more than one brokerage. It also legalises the already widespread activity of margin lending, and allows buying and selling of the same stock on the same day.

After the news, the VN-Index soared 2.52 per cent above the 461.93-point level in early trading on June 3, after strong gains the previous day.

The HNX-Index also jumped to above 73 point level by the week closing session, making up good ground after it had plunged to below the 69-point level several days earlier.

Tran Hai Yen, Bao Viet Securities’ (BVSC) senior analyst, added that although the eagerly-anticipated T+2 transaction reforms were not part of the package of reforms, the news on margin trading and multiple accounts would also help break the bottleneck on transactions and boost market liquidity.

Fiachra MacCana, Ho Chi Minh City Securities Corporation’s (HSC) head of research, said these were interesting developments.

“While the details on margin trading are still unknown in general it is to be welcomed,” said MacCana. 

Nguyen Van Manh, Kim Eng Vietnam deputy general director, said the reforms would not only improve liquidity. The official margin allowance would level the playing field for securities firms as previously numerous firms had offered different margin levels to clients.

“Once [the rules] are applied, the market regulator will clarify details about margin ratios, [and] which stocks are allowed to use margins to ensure margin activities are more transparent,” said Manh.

Tran Thien Ha, An Phat Securities general director, added that numerous securities firms already allowed clients to illegally use margins, open multiple accounts, and buy and sell the same stocks on the same day.

“Therefore, the new circular will create a competitive investment environment and equality between brokerages,” said Ha.

Marc Djandji, Viet Capital Securities Company’s (VCSC) research director, viewed the new rules as a game changer for the brokerage industry as it meant brokers would compete on flows rather than on accounts.