Sat. Mar 23rd, 2024

Since its issuance late last year, Circular 36/2014/TT-NHNN, which set
limits on how much banks can lend to stock investors, has had a strong
impact on both credit institutions and the securities market. Investors
fear that the total amount available for margin loans will drop
dramatically after the Circular takes effect on February 1.

Chairman
of the Hochiminh Stock Exchange, Tran Dac Sinh, shared with the Thoi
bao Kinh te Vietnam (Vietnam Economics Times) newspaper his opinion on
the regulation, as well as this year’s development plan for the
exchange.

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 operation
limits and new ratios of permitted credit institutions and branches of
foreign-owned banks in Vietnam. This circular puts limits on stock
investments 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 the
securities market.

Credit institutions play a very important role
in the country’s economic development, it is its life-line, providing
capital to the economy as well as connecting businesses to the market
through their credit activities. Therefore, regulations that ensure
their safe operation are crucial to the development of both the
financial market and the nation’s economy.

At present, there are
many reports on the probable impact of the Circular 36 on the stock
market, and this has a certain effect on investors’ psychology. In my
opinion, to help investors have a better understanding of the new
regulation, relevant authorities should be the ones publishing official
data on the securities lending.

To reduce the stock market’s
reliance on bank lending, we need to develop other investment inflows
such as from foreign and institutional investors. To enable this, the
regulations relating to foreign ownership need modifying soon and need
to 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 over
the previous year. This was much lower than 2013’s year-on-year increase
of 22 percent. The market’s development accurately reflected domestic
economic progress, the East Sea crisis and plunges in global oil prices.

Yet,
the exchange also saw some encouraging results. The VN-Index hit 640.75
points on September 3, a peak in the past six years since the global
financial crisis in 2008. Liquidity doubled in the year with an average
trading value of over 2.1 trillion VND (98 million USD) per session, of
which trading by foreigners accounted for 12 percent of the total market
value.

The number of new listing registrations and auctions
increased, including the participation of big corporations. The launch
of the first exchange-traded fund (ETF) on the exchange especially
helped diversify products on the market, making Vietnam one of the most
attractive 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 more
comprehensive information about the different segments of the market and
thus increased investment opportunities.

The new index set was
welcomed by investors, particularly investment funds. Many funds studied
the 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 the
VN-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 and
Total Return Index. With regard to products like Covered Warrant or the
non-voting depository receipt (NVDR), the exchange is quickly working
with the State Securities Commission and other relevant authorities to
complete the necessary legal framework and tackle other hindrances in
order to launch soon.-VNA

By vivian