Stock Market: Changes at Macro Level

 

Early July, relevant units such as the Ministry of Finance, the SBV, the Vietnam Securities Depository, BIDV will be meeting with members of the market to begin the implementation and review legal documents, especially, the units will adjust technology to ensure a smooth operation post-transfer.

 

By international practice, central banks as lenders are the last on currency markets. Therefore, for the stock market, they are truly the ones to undertake this responsibility. This will also drive the government to adjust and rearrange this payment channel accordingly.

 

First, by assuming this duty, the SBV finally can manage the cash flows of government bonds on both primary bond auction market and secondary bond trading market. Along with it, the role of state management will be enhanced while the link between monetary policy and fiscal policy will be tightened, leading to more appropriate behaviour in the open market or discount market and refinancing. This will help strengthen the SBV’s authority over the monetary market in particular and financial market in general, especially when the market has a shortage of liquidity.

 

Besides, this change of payment channels which has also been the expectation of financial investors, will make them feel more fair, transparent and safer. As the payment manager, BIDV was allowed to use the money on the account balance and got service fees while other commercial banks had to pay through another bank. With a daily trading volume up to tens of trillion VND, those customers felt unfair.

 

According to Mr Nguyen Son, Head of the Market Development Board, the State Securities Commission (SSC), in the coming time the stock market would welcome many new products. Specifically, there were two new product groups under production and were expected to create positive reactions in the market.

 

 “The first group is the structure assets, such as ETFs (already launched), Covered Warrant (CW), Global Depository Receipt (GDR), Global Depositary Notes (GDN). These products are designed to give additional tools to investors as well as issuers and intermediary organisations involved in the job,” said Mr Son.

 

The second group focuses on products related to the derivative group. Early 2017, the SSC will launch the two most basic products in derivative group which are Index futures and Bond futures. These products have high stability and require investors to be more professional because manipulating base products will be much harder compared to individual stocks. After finishing with these two, market operation agencies will proceed to put out the more complex products such as index options - a tool that has been developed in regional markets with large transactions. The next few years will see stock options or bond futures be introduced.

 

Derivative products are both risk avoiding and benefit maximizing tools. To prepare for this task, the Depository Centre is building a central counterparty clearing system (CCP) because only CCP can pay for the derivative.

 

In the near future, SSC will also develop professional tools that provide leverage effect such as allowing stock exchanges during the day, allowing the transaction on the way, allowing developers to add market support tools market as securities borrowing and lending system to support shortfall in investors’ payment. Selling bonds by getting loans is considered as secured short selling. This tool enables lending institutions both get a loan of and sell government bonds, a highly feasible option which is being considered by the SSC, who is surveying market opinions before submission to the Ministry of Finance.

 

However, there are products that mainly cater to organizations with large capital, it requires long-term investment and generates low profits; therefore it will not be of interest of individual investors. Therefore, some securities companies and investment funds are researching products that securitizing real estate loans into debt instruments to be brought into the market. If successful, this could provide other detonators that provide funds for real estate.