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Deputy PM reassures investors at launch of derivatives market

Released at: 14:56, 11/08/2017

Deputy PM reassures investors at launch of derivatives market

Deputy PM Vuong Dinh Hue (3rd from left) and other senior officials launched the derivatives market on August 10. Photo VGP

Rumors precede launch of derivatives market on August 10, hitting VN-Index.

by Quang Huy

Deputy Prime Minister Vuong Dinh Hue has stepped in to calm investors after more than VND45.8 trillion ($2 billion) was wiped off Vietnam’s stock market on August 9, reassuring investors at the launch of the country’s first derivatives market on August 10 that the market was indeed healthy.

The benchmark VN-Index fell 17.92 points on August 9, its biggest loss since early last year, right after it hit a nine-year high of 796.62 points on August 8. Deputy PM Hue blamed the crash on “unsubstantiated rumors”.

Word began to spread that Mr. Tran Bac Ha, former Chairman of BIDV, one of the largest lenders in the country, had been arrested in connection with a $400 million graft case that saw Tram Be, another banking tycoon, arrested last week.

But local media on the same morning quoted Mr. Ha, who retired last September, as saying that “everything is normal”. A source from the Ministry of Public Security also confirmed that no new arrests had been made.

Market insiders said the downtrend was led by this rumor together with a bearish global market. Blue chips and financial stocks were the worst hit. Of the 12 banking stocks, eleven closed down on August 9, by a combined VND15.7 trillion ($690.8 million). BIDV alone lost VND7.5 billion ($330 million).

“I hope that both investors and businesses will continue to have faith,” Deputy PM Hue said on behalf of the government, asking them to be cautious about unofficial information. “There have been groundless rumors like this before. Investors should be calm and confident.”

In September 2013, Ho Chi Minh City authorities fined three Vietnamese investors for spreading the same rumor about Mr. Ha’s arrest, which caused the VN-Index to fall 18.1 points, or 3.66 per cent. This time around the market has stabilized, but most banking stocks are still in the red.

Speaking of the launch of the derivatives market, Deputy PM Hue said that “this is an important milestone in the development of Vietnam’s securities market that satisfies expectations of the government and the business and investor communities,” adding that the launch comes 13 years earlier than normally expected.

Derivatives trading in Vietnam was planned several years ago, to help draw more investment to its capital markets and broaden the finance industry. The futures market will initially launch stock index contracts in the VN30-Index and when fully operational will introduce more instruments.

Deputy PM Hue stressed the importance of the derivatives market in the structural development of the financial market as well as in the development strategy of the securities market.

He asked the Ministry of Finance and the State Securities Commission to study and complete the legal framework and policies to put the derivatives market into operation on the basis of prudence and synchronicity and in accordance with international practice.

“[The launch] will help attract more foreign investors, institutional investors in particular, and boost market liquidity,” the stock exchange said in a statement.

Vietnam is the fifth country in the ASEAN region to launch a derivatives market, joining Singapore, Malaysia, Thailand, and Indonesia.

The VN30-Index, which is reviewed periodically, captures the performance of the 30 largest companies by market capitalization on the Ho Chi Minh City Stock Exchange. Futures contracts are allowed to move by a maximum of 7 per cent in each session.

The VN-Index has risen 19.1 per cent so far this year and hit its highest level since 2008, of 796.62 points, on August 8.

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