Group suggests solutions to market problems
Group suggests solutions to market problems
Viet Nam's securities market is facing problems of falling investor confidence, low liquidity, poor quality offerings and limitations on foreign investment, says Dragon Capital CEO Dominic Scriven, who also heads the Market Capital Working Group.
At a meeting of the working group earlier this week, held to prepare for next month's annual Viet Nam Business Forum, the group made recommendations to the State Securities Commission and the Ministry of Finance to help boost the nation's capital markets.
Unstable economic conditions have adversely affected the financial markets since 2010, with only a brief recovery in the market in the first half of this year, Scriven told the meeting. New concerns about the health of the banking system, however, have pulled the rug out from other the market again.
Trading values on the market, averaging US$20-30 million per session in recent months, have been too low to attract investor interest, and foreign ownership limits in many of the best companies have already been reached, precluding much new investment.
"As a result, the stock market is no longer able to properly perform its function as a channel to attract long-term capital," Scriven said.
The working group urged a hike in the percentage of foreign ownership in companies and also pointed out shortcomings in administrative procedures related to issuing trading codes to foreign investors. An open market should not restrict foreign ownership, they said, urging the authorities to create a type of shares without voting rights for foreign investors that would allow them to enjoy investment benefits (e.g., dividends, rights to buy additional shares) but not enable them to interfere in company management.
The group also called for a widening of the trading bands applicable to shares, the limit on gains or losses imposed on shares within a single trading day.
They said the current bands limited natural movement of share prices, negatively affecting share liquidity, and that wider bands and shortened transaction settlement periods would improve market liquidity.
The group also suggested that short selling be made legal, accompanied by strengthened regulatory oversight of the activity to ensure transparency and fairness to all market participants.
Nguyen Son, head of the commission's market development department, said that stock markets were declining globally, not only in Viet Nam, and authorities needed to monitor leveraged products carefully. Several major stock markets around the world have imposed strict regulations on short selling, and the European Commission has banned it altogether, Son told the newspaper Dau tu Chung khoan (Securities Investment).
"In this context, short-selling is a double-edged sword and must be considered very carefully before implementation," he said.
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