New securities products not ready for 2018

December 24, 2018 - 11:00

A number of securities products won’t be introduced by the end of 2018 as promised by local stock exchanges.

A number of securities products won’t be introduced by the end of 2018 as promised by local stock exchanges.— Photo

HÀ NỘI — A number of securities products won’t be introduced by the end of 2018 as promised by local stock exchanges.

Since the derivatives market went into operation on August 10, 2017, the two local bourses and market regulators have promised new products would be launched by the end of this year such as government bond futures contracts and covered warrants.

Both Hồ Chí Minh and Hà Nội stock exchanges are ready to introduce the two new products as all preparations for technical issues and trading mechanisms have already been completed.

But the two products are not yet available on the market this year and their future is not decided yet either, sources at the two bourses told

Neither are others such as pension funds and intraday trading. The delay of new products has damaged the confidence of investors and market members.

But the two trading bourses can only propose plans for new securities products and they are not allowed to determine when those products can be traded, according to the two bourses.

Meanwhile, the stock market is often quiet in the year-end period, especially the last trading week of the year, as investors tend to hold on to cash rather than buying assets.

Therefore, market regulators would choose to prioritise the stabilisation of the stock market while not taking risks deploying new securities products.

The reasons for that include weak demand for securities in the year-end period, more capital inflow for the real estate market, and more investment for the production sector.

According to the Vietnam Bond Market Association (VBMA), the demand for government bond futures is still limited.

The bond market is still small in scale as trading is mainly carried out between commercial banks.

But less than 10 banks are active on the government bond market, proving this market is not attractive enough to lure attention from other banks and other types of business.

Meanwhile just a few foreign investors are holding on to government bonds, leading to little demand in buying government bond futures contracts to hedge the risks.

Additional causes for the delay of new securities launches include the lack of incentives and preferential policies for traders and market members when they join those markets, according to analysts.

Whenever a new securities product is launched, investor confidence is often boosted by expectations brought by positive messages of the market regulators and regulations that trading would get dynamic in the early stage, Tô Thành Vinh, deputy general director of the Vietnam Industry and Commercial Securities Corporation (VICS), said.

The launch of new securities is necessary for the further development of the Vietnamese equity market and that should be enhanced by the market regulators in the near future, Vinh said.

Individual investor Nguyễn Văn Mạnh said that the market regulators should put new securities products, which meet investors’ demand, at the top of the priority list such as intraday trading and pension funds.

Investors have been expecting intraday trading mechanisms to be official in recent years, Mạnh said, adding that the new trading mechanism would help investors diminish potential risks, increase the market liquidity and improve its attractiveness to investors. — VNS