Since its issuance late last year, Circular 36/2014/TT-NHNN, which setlimits on how much banks can lend to stock investors, has had a strongimpact on both credit institutions and the securities market. Investorsfear that the total amount available for margin loans will dropdramatically after the Circular takes effect on February 1.
Chairmanof the Hochiminh Stock Exchange, Tran Dac Sinh, shared with the Thoibao Kinh te Vietnam (Vietnam Economics Times) newspaper his opinion onthe regulation, as well as this year's development plan for theexchange.
Q: What impact do you think Circular 36 will have on the stock market? What are some solutions to the current difficulty?
A:The circular, slated to take effect on February 1, sets safe operationlimits and new ratios of permitted credit institutions and branches offoreign-owned banks in Vietnam. This circular puts limits on stockinvestments and sets the conditions for banks to be able to give loans.We need a longer time to analyse the impact of this circular on thesecurities market.
Credit institutions play a very important rolein the country's economic development, it is its life-line, providingcapital to the economy as well as connecting businesses to the marketthrough their credit activities. Therefore, regulations that ensuretheir safe operation are crucial to the development of both thefinancial market and the nation's economy.
At present, there aremany reports on the probable impact of the Circular 36 on the stockmarket, and this has a certain effect on investors' psychology. In myopinion, to help investors have a better understanding of the newregulation, relevant authorities should be the ones publishing officialdata on the securities lending.
To reduce the stock market'sreliance on bank lending, we need to develop other investment inflowssuch as from foreign and institutional investors. To enable this, theregulations relating to foreign ownership need modifying soon and needto further open up our market to new sources.
Q: How did the Hochiminh Stock Exchange's index fare in 2014?
A:As of December 31, 2014, the benchmark VN-Index rose 8.14 percent overthe previous year. This was much lower than 2013's year-on-year increaseof 22 percent. The market's development accurately reflected domesticeconomic progress, the East Sea crisis and plunges in global oil prices.
Yet,the exchange also saw some encouraging results. The VN-Index hit 640.75points on September 3, a peak in the past six years since the globalfinancial crisis in 2008. Liquidity doubled in the year with an averagetrading value of over 2.1 trillion VND (98 million USD) per session, ofwhich trading by foreigners accounted for 12 percent of the total marketvalue.
The number of new listing registrations and auctionsincreased, including the participation of big corporations. The launchof the first exchange-traded fund (ETF) on the exchange especiallyhelped diversify products on the market, making Vietnam one of the mostattractive frontier markets in Asia.
Q: The exchange introduced a new index set last year to satisfy investor demand. How has it worked?
A:The launch of the HOSE-Index set provided investors with morecomprehensive information about the different segments of the market andthus increased investment opportunities.
The new index set waswelcomed by investors, particularly investment funds. Many funds studiedthe HOSE-Index and are now prepared to set up new ETFs. In addition,the new indices, which are calculated by an adjusted free-floated ratio,liquidity and other criteria, have overcome the shortcomings of theVN-Index and become a good reference for Vietnam's stock market.
Q: Could you disclose what new products will be launched this year?
A:In 2015, the exchange will continue to launch the Index sector andTotal Return Index. With regard to products like Covered Warrant or thenon-voting depository receipt (NVDR), the exchange is quickly workingwith the State Securities Commission and other relevant authorities tocomplete the necessary legal framework and tackle other hindrances inorder to launch soon.-VNA
Chairmanof the Hochiminh Stock Exchange, Tran Dac Sinh, shared with the Thoibao Kinh te Vietnam (Vietnam Economics Times) newspaper his opinion onthe regulation, as well as this year's development plan for theexchange.
Q: What impact do you think Circular 36 will have on the stock market? What are some solutions to the current difficulty?
A:The circular, slated to take effect on February 1, sets safe operationlimits and new ratios of permitted credit institutions and branches offoreign-owned banks in Vietnam. This circular puts limits on stockinvestments and sets the conditions for banks to be able to give loans.We need a longer time to analyse the impact of this circular on thesecurities market.
Credit institutions play a very important rolein the country's economic development, it is its life-line, providingcapital to the economy as well as connecting businesses to the marketthrough their credit activities. Therefore, regulations that ensuretheir safe operation are crucial to the development of both thefinancial market and the nation's economy.
At present, there aremany reports on the probable impact of the Circular 36 on the stockmarket, and this has a certain effect on investors' psychology. In myopinion, to help investors have a better understanding of the newregulation, relevant authorities should be the ones publishing officialdata on the securities lending.
To reduce the stock market'sreliance on bank lending, we need to develop other investment inflowssuch as from foreign and institutional investors. To enable this, theregulations relating to foreign ownership need modifying soon and needto further open up our market to new sources.
Q: How did the Hochiminh Stock Exchange's index fare in 2014?
A:As of December 31, 2014, the benchmark VN-Index rose 8.14 percent overthe previous year. This was much lower than 2013's year-on-year increaseof 22 percent. The market's development accurately reflected domesticeconomic progress, the East Sea crisis and plunges in global oil prices.
Yet,the exchange also saw some encouraging results. The VN-Index hit 640.75points on September 3, a peak in the past six years since the globalfinancial crisis in 2008. Liquidity doubled in the year with an averagetrading value of over 2.1 trillion VND (98 million USD) per session, ofwhich trading by foreigners accounted for 12 percent of the total marketvalue.
The number of new listing registrations and auctionsincreased, including the participation of big corporations. The launchof the first exchange-traded fund (ETF) on the exchange especiallyhelped diversify products on the market, making Vietnam one of the mostattractive frontier markets in Asia.
Q: The exchange introduced a new index set last year to satisfy investor demand. How has it worked?
A:The launch of the HOSE-Index set provided investors with morecomprehensive information about the different segments of the market andthus increased investment opportunities.
The new index set waswelcomed by investors, particularly investment funds. Many funds studiedthe HOSE-Index and are now prepared to set up new ETFs. In addition,the new indices, which are calculated by an adjusted free-floated ratio,liquidity and other criteria, have overcome the shortcomings of theVN-Index and become a good reference for Vietnam's stock market.
Q: Could you disclose what new products will be launched this year?
A:In 2015, the exchange will continue to launch the Index sector andTotal Return Index. With regard to products like Covered Warrant or thenon-voting depository receipt (NVDR), the exchange is quickly workingwith the State Securities Commission and other relevant authorities tocomplete the necessary legal framework and tackle other hindrances inorder to launch soon.-VNA
