Derivatives market sees remarkable growth in last 6 years

August 17, 2023 - 08:50
In the last six years, the average growth of VN30 index futures contract transactions was 27.46 per cent.
The derivatives market has become a risk-hedging tool for investors. — Photo

HÀ NỘI — The derivatives market has experienced stable growth with dynamic trading activities and more investors after six years of operation, according to the Hà Nội Stock Exchange (HNX).

August 10 marked the opening of the derivatives market and its first product of the VN30 index futures contract.

The exchange said that the derivatives market has gradually become a risk-hedging tool for investors, which is partly reflected in the increases in trading volume on the market when the primary market fluctuates strongly.

It also helps ease the selling pressure on the primary market, stabilising investor sentiment, balancing the market and capping losses of the primary market's benchmark index.

For example, when the market tumbled due to the impact of the COVID-19 pandemic in 2022, the liquidity of the derivatives market soared by 43.8 per cent over the previous year. This was consistent with the general movements of the global derivatives market, when the global primary markets entered the downtrend, leading to the cash inflow into the derivatives market as demand for safe-haven increased.

According to HNX, the market size and liquidity of the VN30 index futures contract grew strongly at an average of 38.65 per cent during 2018-22. Particularly, 2020 witnessed the highest growth rate of 79.9 per cent over 2019, followed by the growth speed in 2022, up 43.8 per cent on-year.

In the first seven months of 2023, the average trading volume reached 225,178 contracts per session, down 17.41 per cent year-on-year, but still the second-highest average annual transaction, only after the record set in 2022.

In the last six years, the average growth of VN30 index futures contracts was 27.46 per cent.

The derivatives market is also a profitable investment channel for investors. With two-way trading and being able to buy and sell continuously during the session, investors can make profits even when the primary market plummets.

As a result, the number of derivatives trading accounts has continuously risen. As of the end of July, there were more than 1,3 accounts on the market, 546 times higher than the beginning period, said HNX.

The derivatives market is an effective solution to hold cash flow in the stock market, avoiding investors fleeing from the market when the primary market declines.

Moreover, the strong growth of the derivatives market has attracted the attention of foreign investors. Transactions of foreign investors on the market edge higher every year, with the amount of the next year usually increasing by 2-3 times the previous year.

In July, foreign investors' transactions accounted for 3.47 per cent of the total trading volume in the whole market compared to 0.1 per cent at the end of 2017.

HNX said that the derivatives market plays an increasingly important role in promoting the development of the country's stock market, contributing to perfecting the stock market structure, and meeting one of the mandatory conditions for the stock market to be considered for an upgrade from frontier market to emerging market in the near future.

To further promote the role of the defensive status as well as an effective investment channel, and to meet the diverse needs of investors, the derivatives market needs to introduce more new derivative products such as futures contracts on the VN100 index, HNX said. — VNS