Regret expressed for stock market capacity shortcomings

June 29, 2021 | 23:18
Technical outages at the Ho Chi Minh City Stock Exchange will be addressed with the help of tailor-made solutions from domestic and foreign partners – but Vietnam’s equity market, nevertheless, remains out of the loop when it comes to international classification upgrades.
Regret expressed for stock market capacity shortcomings
The HSX has been beset by technical problems in recent months. Photo: Le Toan

Tran Van Dung, chairman of the State Securities Commission (SSC), expressed his regret and apologised last week to investors and relevant stakeholders because of the long-standing trading congestion at the Ho Chi Minh City Stock Exchange (HSX).

“The HSX’s inability to function smoothly over the past few months is a national concern,” he said. “Tackling the blockage is the prime priority for us to promote the development of Vietnam’s stock market.”

In addition, the HSX is considering some proposals to improve the performance of the bourse while reducing fees for investors.

SSI chairman Nguyen Duy Hung commented, “Whatever the reasons are, we still owe both retail and institutional investors a genuine, sincere apology. Investors have to bear a wide range of fees from securities companies and the HSX, and they must get what they pay for.”

Le Hai Tra, CEO of the HSX said at last week’s conference, “Thailand, Singapore, Malaysia, Indonesia, and the Philippines have already imported and mastered advanced trading infrastructure from Nasdaq in the United States. Vietnam, on the other hand, has still relied on a 20-year-old trading system from Thailand’s previous stock exchange and is now looking for a fresh upgrade from the Korean Stock Exchange.”

Notwithstanding, Tra noted that the 100-day plan to replace the trading system, led by the HSX and FPT, is yielding positive results.

Duong Dung Trieu, chairman of FPT Information System under FPT Group, is fully confident that the new trading infrastructure developed will dispel congestion on the HSX.

“FPT has already identified potential issues and prepared remedial measures. It is expected that by the end of June, the FPT trading system can be taken live,” he said.

Domestic investors are the greatest driving force and the major catalyst for market development. “This is a once-in-a-lifetime opportunity to build the Vietnamese stock market correctly. Therefore, it is necessary to provide a transparent, smooth, and professional playground for them,” Hung of SSI added.

Dung of the SSC said that after the outbreak of the pandemic, it sent a report to the Ministry of Finance (MoF), which quickly took action to support investors.

The MoF has reduced 20 out of 22 securities fees, of which transaction fees were slashed by 10 per cent. The fee reduction kicked off last April and the SSC is making a proposal to extend the timeline to the end of 2021. The move will facilitate securities firms to slash further fees for investors.

Last year, the MoF signalled that intra-day trading and short selling would be implemented, which could be a boost for the local stock market.

“However, even traded stocks settling in two business days is inconceivable now. Further instalments for this mechanism would be thoroughly discussed when the new trading system is officially implemented,” the SSC chairman cautioned.

Another proposal is to improve the quality of products on the stock market. Specifically, the pace of state equitisation and divestment could be accelerated to increase supply.

“Another issue that needs to be considered carefully is robot trading and a fee reduction for such transactions. The main reason is that there will be a trade-off between the speed of placing orders between the robot and individual investors. Besides the benefit of liquidity, the increasing adoption of robots will affect individual investors,” Dung said.

Despite the latest initiatives, Vietnam has still missed out on a Morgan Stanley Capital International’s (MSCI) emerging market status upgrade. In its fresh market classification review, MSCI hinted that Vietnam “still maintained some measure of restrictions, with no explicit guidelines on when they will be lifted, thus negatively affecting its status.”

According to MSCI, Vietnam meets all quantitative criteria for inclusion but falls short on qualitative measures such as the market’s limited openness to foreign investors and equal treatment for them.

Moreover, a lack of information like corporate news and reports and government regulations in English are also a factor.

Notably, the lack of an offshore currency market makes it difficult for foreign investors to convert their holdings from VND to foreign currencies while the onshore currency market remains limited.

Nevertheless, the momentum in the Vietnamese stock market has been encouraging. “The large trading volume has presented challenges to the HSX due to the system being at full capacity. Improvements are expected at the beginning of July,” noted Petri Deryng, portfolio manager of PYN Elite.

By Luu Bui

What the stars mean:

★ Poor ★ ★ Promising ★★★ Good ★★★★ Very good ★★★★★ Exceptional