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Derivatives market underway on August 10

Released at: 10:45, 09/08/2017

Derivatives market underway on August 10

Illustrative image (Source: vietnamnews.vn)

Futures contracts for VN30-Index to be launched first to limit risks.

by Quang Huy

Vietnam’s derivatives market will officially come into being on August 10, with the futures contracts for the VN30-Index, which tracks the performance of the 30 largest companies by market value on the Ho Chi Minh Stock Exchange (HoSE), to be launched first to limit risks.

According to a direction from the Prime Minister, since the derivatives market is new and under trial, the VN30 futures contract will be launched first while the HNX30 and government bond futures will be added to the lineup later, Mr. Pham Hong Son, Vice Chairman of the State Securities Commission, told a press conference on August 8.

Vietnam’s securities market authorities said that all preparatory activities have been completed and that now is the right time to launch derivatives as the country’s 17-year-old stock market is stable.

While the current collateral requirements in the derivatives market are 80 per cent in cash and 20 per cent in shares, the margin ratio will be set at 100 per cent in cash in the initial stage to ensure the highest degree of safety. All investors must make deposits in cash or shares at the Vietnam Securities Depository (VSD) and at authorized traders before a transaction takes place.

The market will open at 8.45am, 15 minutes earlier than the opening of the stock market, and close at 3pm. Prices of products are allowed to fluctuate by +/- 7 per cent and the minimum price step is 0.1 with a coefficient of VND100,000 ($4.4).

A transaction unit is one contract. The last trading day is the third Thursday in the month of maturity. The month of maturity is the current month, the next month and the last two months of the next two quarters.

The Hanoi Stock Exchange (HNX), VSD, and Vietinbank have finished testing the trading system with seven securities companies - the Ho Chi Minh Securities Corp. (HSC), Saigon Securities Inc. (SSI), VP Bank Securities, Viet Capital Securities, VNDirect Securities, BIDV Securities, and MB Securities - approved as authorized traders on the market.

According to securities firms, some 2,000 derivative accounts have been activated so far.

The Hanoi bourse has worked with SSI for two years developing the derivatives market, which was initially planned to open in 2016. Mr. Nguyen Duy Linh, Director of SSI, said at a seminar in Ho Chi Minh City last month that derivatives products could help investors predict the future movement of securities and turn profits on their invested assets.

Other countries in Southeast Asia, including Singapore, Thailand, Indonesia and Malaysia, already offer derivatives products on local stock markets.

In June, US investment research firm MSCI declined to place Vietnam on its watch list for emerging-market status, pointing out inhibitors such as conditions on foreign ownership, including individual and market-wide ownership limits.

Vietnam’s stock market authorities have been urged to shore up investor confidence and upgrade the stock market by the next review in 2018. Providing more products to the market, increasing foreign ownership limits, equitizing State-owned enterprises, and restructuring banks are likely the main items on the agenda.

SSI’s figures show that Vietnam’s stock market performed well during the first half of 2017, with the VN-Index rising 16.8 per cent to 776.47 points and the HNX Index gaining 23.7 per cent to 99.14 points.

Foreign investment returned to a net surplus of over VND9.04 trillion ($397 million) in the January-June period, compared with a net deficit of VND6.76 trillion ($297.4 million) last year.

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