Shorter settlement time benefits investors
Shorter settlement time benefits investors
The State Securities Commission's plan to shorten settlement time for transactions from the current three days to two, may not boost liquidity in the market but benefits investors, experts said.
The SSC has directed the Viet Nam Securities Depository Central to build a project which allows reducing the settlement date from 9am on three days (T+3) to 4.30pm on two days (T+2), effective from January 1, 2016.
The watchdog said this was part of the general development plan for Viet Nam's securities market as well as aimed to gradually adopt international standards and practices for trading activities and transaction settlement.
Both analysts and investors said that this change would not help boost overall liquidity on the market since by the time the money and securities arrive at investors' accounts the two markets are already closed.
Trading hours on the two national stock exchanges start at 9am and close at 3pm with a break from 11.30am to 1pm every Monday to Friday.
"I do not see any difference in the newly proposed plan," Le Duc Hiep, a Ha Noi-based investor told Viet Nam News.
"The most important thing to investors is that money and securities will arrive in their accounts within the trading hours to make transactions. Under the new regulation, we still must wait until tomorrow to buy or sell shares," Hiep said.
However, if seen from another perspective, analysts say this regulation will help investors reduce interest expenses, particularly who borrow money to buy securities (margin) or use service of cash advancement provided by brokerage companies.
"Money arriving in investors' accounts a day earlier will help them save a day of interest expense," Duong Hoang Linh, an analyst at Sacombank Securities Co, said and added that it was a big cut in investment cost for traders who make frequent trade.
Margin interests at most securities companies are popularly between 13 per cent and 15 per cent per year, equivalent to 0.03 per cent and 0.04 per cent per day. If an investor borrows VND10 billion (US$444,400) to buy shares, he can save from VND3 million to VND4 million ($133-$178) in interest expense.
This rule also benefits traders who use cash advancement service at securities firms. Interest rates on such a loan are also 0.03 per cent to 0.04 per cent per day and the receiving money one day earlier will also help these investors save interest cost.
According to Nguyen Son, SSC's head of Market Development Division, although traders cannot make transactions on the stock exchanges under this new regulation, they still have choices to use these shares as mortgage to borrow money or make other deals.
Son also said this was only the first phase of the plan and the securities watchdog has prepared a roadmap to lift the settlement date to 2pm on T+2 in the future.
