Why stock trading value keeps scaling new peaks
Why stock trading value keeps scaling new peaks
New investors flocking into the stock market and securities firms disallowing cancellation and modification of orders are major factors behind HoSE trading value climbing peak after peak.
An investor looks at stock prices on the screens at a brokerage in Ho Chi Minh City. Photo by VnExpress/Quynh Tran.
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Trading value on the Ho Chi Minh Stock Exchange (HoSE) hit a record high of VND29.31 trillion ($1.27 billion) on Thursday. The value has been rising for the last seven sessions since May 25, up 38 percent from May 25.
The seven sessions do not include Tuesday's session when HoSE shut down after the morning session for the first time because its system was overloaded by a trading surge.
The CEO of a top 10 securities firm in terms of market share attributed the higher trading value to several reasons.
Firstly, the number of new investors entering the stock market in May scaled a new monthly record, with over 113,000 new trading accounts opened, increasing cash flow into the stock market. This happened because the ongoing pandemic has affected several other investment channels including real estate and bank deposits, making idle funds shift to the stock market.
Secondly, the bullish market has prompted both new and old investors to pour more cash into the market. Vietnam’s benchmark VN-Index Thursday reached new historic peak of 1,364.28 points, its fifth consecutive session in the green. The index has risen by 23.6 percent this year.
Thirdly, some brokerages which manage a large number of trading accounts have disallowed changing and cancelling orders during peak trading hours or for the whole session. Some have recommended that investors trade in the morning session, and refrain from dividing a large order into smaller ones. By disallowing order cancelations and modification, brokerages have enabled investors to place more orders, thus pushing trading value up.
Le Hai Tra, CEO of HoSE, said the plunge in the number of modifications and cancellations in the last few days has helped improve the liquidity and mitigate technical errors that threaten system safety.
Cancelations and modifications accounted for over 33.5 percent of orders in the first five months of 2021. However, the figure dropped to 22.5 percent in Wednesday's session, when some brokerages began halting the options of cancelling and modifying orders on the main bourse. The figure continued to slip to below 18 percent Thursday session.
The bourse can handle a maximum of 900,000 transactions a day, Tra said, adding that disallowing cancellations and modifications will ease the pressure on the system of brokerages in calculating and updating data.
A total of 20 brokerages, which account for 90 percent of the stock market share, agreed with HoSE Thursday to control the options of modifying and cancelling orders.
Brokerage VNDirect’s CEO Do Ngoc Quynh said disallowing cancellations and modifications was necessary for the system to operate smoothly. It is a temporary step while waiting for the new system developed by IT giant FPT to start operating in July, Quynh said.
Tra said "the surging trading value in Thursday’s session has proven the effectiveness of halting cancelling and modifying options."
