Derivatives market sees liquidity slump in April
Hanoi (VNS/VNA) - Trading volume of derivatives plummeted in April in parallel with the sluggishness of the underlying market, showing an increasingly close link between these two markets.
When the underlying market falls, investors will theoretically seek
opportunities to make profit on the derivatives market, because it
allows them to earn profits even as the underlying market declines.
The liquidity of the derivatives market often soars when the underlying market
fluctuates. Thus, the derivatives market is an effective solution to retain
investors, helping avoid a situation in which they withdraw from the stock
market and cause collapses. But things moved in reverse in April.
According to statistics from the Hanoi Stock Exchange (HNX), in April this
year, along with the decline of the stock market, transactions on the
derivatives market fell sharply compared to March. The average trading
volume decreased by 40.45 percent to about 80,700 contracts per session.
The session on April 22 had the lowest trading volume during the
month –also the lowest level since the beginning of the
year – reaching nearly 56,300 contracts. The session on April 9 had
the highest trading volume, reaching over 103,900 contracts.
Notably, in the last trading session of the month on April 26, the
derivatives market had an impressive session. Total trading volume for the
session was 102,677 contracts – only slightly higher than the
average figure of the previous month, 100,000.
The average trading value of the VN-30 Index basket in April reached just 1.4
trillion VND (59.9 million USD), down 30 percent compared to the middle of
March. The trading value of futures contracts on April 19 reached nearly
950 billion VND, equal to 50 percent of the average trading value of VN-30
basket in March.
The open interest (OI) – the total number of open or outstanding options
and futures contracts – decreased by 10.93 percent from the previous
month. By the end of April 29, the OI volume of the whole market reached 21,267
contracts.
The number of derivatives trading accounts continued to increase. At the
end of April, the figure reached 70,112 accounts, up 4.04 percent over the
previous month.
In April, the transactions carried out by individual domestic investors
accounted for a large proportion but still decreased significantly compared to
the previous months, standing at 92.9 percent of the total derivatives trading
volume.
The proportion of transactions carried out by domestic institutional investors
(including self-trading) increased sharply, reaching 6.84 percent, 3.2 times
higher than the previous month.
Excluding self-trading, the trading value of this group nearly tripled compared
to March, reaching more than 185,000 contracts, the highest level since the
inception of the derivatives market.
Transactions by foreign investors in April decreased according to the general
trend of the stock market, reaching 8,165 contracts, equal to 60 percent of the
number seen in the previous month, accounting for 0.27 percent of the total
trading volume of the whole market.-VNS/VNA