Vietnamese stocks waiting for new products

Vietnam's stock market needs substantial upgrades beyond the story of quality goods to attract and retain large foreign capital flows.

The KRX system not only shortens settlement time and meets the T+2 cycle criteria, but also allows the implementation of operations such as intraday trading - Photo: QUANG DINH

In the period approaching the upgrade from frontier to emerging, according to experts, Vietnamese securities need to substantially upgrade, such as trading mechanisms, diversifying new products in addition to the story of quality goods to attract and retain large foreign capital flows.

The implementation of advanced trading mechanisms such as selling securities pending return, T0, short selling or even trading through noon is discussed as a solution to increase the market's appeal. However, according to experts, in addition to the benefits, there are also accompanying risks that need to be noted...

Opportunity to increase liquidity

Talking to Tuoi Tre , Mr. Thomas Nguyen, director of foreign markets of SSI Securities, said that international investors are always looking for better trading experiences and many new product options in the market. And applying the mechanism of intraday trading or short selling... will be important plus points for the Vietnamese market.

With extensive experience in the international market, Mr. Thomas predicts that market trading volume can increase significantly when new mechanisms and new products are applied.

Vietnam’s current average trading volume has reached more than VND50 trillion, but Mr. Thomas noted that maintaining and promoting this scale is important. High liquidity is always an extremely attractive factor for foreign investors.

However, it cannot be denied that the implementation of new mechanisms and products will come with many concerns, in addition to opportunities. Some investors expressed concerns about the risk of unlimited losses when short selling. While the maximum loss when buying stocks is 100%, when short selling, the stock price can increase unlimitedly, leading to potentially huge losses.

If an investor short sells a stock at 10,000 VND but then the price increases to 50,000 VND, they will have to buy it back at 5 times the price, causing serious damage.

On a market scale, short selling can amplify declines, causing panic and instability during bear markets.

This is the reason why, in the history of development, some countries have had to temporarily ban short selling to stabilize the market. However, Mr. Bui Van Huy, Vice Chairman of the Board of Directors and Director of Investment Research at FIDT Joint Stock Company, said that the Vietnamese and global stock markets are very different from the previous period.

Short selling is an important tool to increase liquidity, create balance and is an effective risk hedging strategy, Mr. Huy said. When there is short selling, overpriced stocks will soon be adjusted to a reasonable level thanks to pressure from short sellers.

"There is no risk from the product itself, but from how people use and manage it," Mr. Huy added.

The KRX system creates the premise for developing new financial products to meet the requirements of stock market development - Photo: QUANG DINH

Waiting for new products, improved trading mechanism

According to Mr. Huy, implementing transactions during the lunch break, if applied, is also a change in line with international practice. However, instead of eliminating the lunch break, transactions should be implemented early during the day.

"Initially, this transaction may only be applied to certain subjects such as professional investors, or applied to certain groups of stocks that meet liquidity and fundamental criteria," Mr. Huy suggested.

Mr. Do Bao Ngoc, Deputy General Director of Vietnam Construction Securities, also said that experience from some markets shows that eliminating lunch breaks does not always increase liquidity.

"For Vietnam, eliminating the lunch break can help the market react faster to international news and facilitate the institutional sector, but the impact on overall liquidity is not necessarily clear because the structure of individual investors still accounts for the majority," Mr. Ngoc predicted.

Meanwhile, for securities companies, trading through noon requires increased staffing and continuous operations, putting additional cost pressure on small firms.

Meanwhile, according to Mr. Ngoc, what the market needs now are new products, with investors shortening the payment cycle, allowing short selling to receive more attention, especially in the context of the Vietnamese stock market still having quite limited products.

Apart from futures contracts on the VN30 index and government bonds, there are no popular derivative products such as contracts on individual stocks or options. "In addition, the settlement cycle is still at T+2, while emerging markets often apply T+0 or T+1, which is considered a key factor to improve flexibility and attract foreign capital flows," said Mr. Ngoc.

Some experts also believe that trading through lunch is not a decisive factor in upgrading the market. In highly volatile market conditions, continuous trading without a break can even reveal its limitations, especially when the staff and system are still new to operation.

Meanwhile, according to experts, the KRX system has initially operated stably, without serious errors affecting market operations. This is a premise for the parties to continue researching and implementing new trading products that have been integrated into the KRX system to better meet the market's development needs, including some new trading mechanisms such as intraday trading and selling pending securities.

Considering the risks, what should you do first?

The launch of the KRX system is an important foundation for trading reform, although it will take more time for the system to operate stably. "A reasonable solution is to pilot trading through noon first with products such as warrants and derivatives to measure the impact, then consider expanding to underlying stocks," Mr. Ngoc suggested.

According to Mr. Ngoc, allowing the sale of pending securities will have a positive impact on psychology and liquidity. Investors will feel more flexible, be able to release capital quickly and reduce the risk of "stuck goods". Market liquidity can therefore increase thanks to faster capital turnover.

However, this policy also has risks, because many individual investors can increase short-term surfing, leading to strong fluctuations during the day. "However, this does not have too negative an impact on the general market. To limit risks, it is necessary to ensure timely handling plans when payment risks arise," said Mr. Ngoc.

Mr. Nguyen Son, Chairman of the Board of Directors of Vietnam Securities Depository and Clearing Corporation (VSDC), said that the sale of pending securities has been regulated in Circular 120, and this function has also been integrated into the KRX system. However, the biggest problem now lies not in the technical infrastructure but in the risk management capacity of market members.

Annual statistics show that many cases still have to deal with post-transaction errors, even delay or eliminate payments due to loose control of customer deposits. "This reality shows that the potential risk of insolvency when implementing intraday trading and selling pending securities is real, and needs to be carefully considered when comparing with the benefits of this product," said Mr. Son.

To minimize risks, according to Mr. Son, market members need to build a serious and strict risk management process and ensure resources to fulfill payment obligations on behalf of customers when necessary. Management agencies continue to improve the risk monitoring and handling mechanism, and impose sanctions on securities companies that do not comply with risk management regulations for intraday trading.

"Selling pending securities will be considered for implementation first, followed by intraday securities trading. In addition, midday trading is also an important content in the plan after the KRX system is officially operational. Implementing midday trading will help investors have more time to trade, reduce pressure on orders at the beginning of the hour and be in line with international practices," said Mr. Son.

Is day trading risky?

Mr. Nguyen Son, Chairman of VSDC Board of Directors, said that implementation in other stock markets shows that intraday trading poses many high risks for investors and the market if not well controlled.

Even in the US stock market, despite high financial and experience requirements for investors, only over 10% of investors make a profit when making these transactions. The Singapore market has a similar situation. In the Taiwanese market, although the market was established in 1961, it was not until 2014 that the regulatory agency allowed intraday trading.

Practical experience from international markets is a valuable lesson for the Vietnamese market and the timing of implementing intraday trading will not be an immediate decision, but will be carefully considered by the management agency based on the most beneficial calculations for the market when conditions permit.

To attract investors, must have attractive products.

Mr. Thomas Nguyen, director of foreign markets at SSI Securities Corporation, said that the scale of capital flow from active funds participating in Vietnam may be smaller than many people expected, because the Vietnamese market is not deep enough to attract large-scale active funds to invest strongly.

Therefore, according to Mr. Thomas Nguyen, the upgrading process and achievements are just a single step in a long journey of capital market development. The biggest risk for the Vietnamese market is being upgraded but not continuing to develop further. The market does not do enough to become more attractive and more accessible to investors.

"Remember that if you have a market and invite people in, but there are no fruits (goods, attractive products), no one will be interested and then they will leave. Vietnam will have to work "harder" after upgrading", Mr. Thomas Nguyen advised.

BINH KHANH - HA QUAN

Source: https://tuoitre.vn/chung-khoan-viet-cho-san-pham-moi-2025090508075442.htm