Brokerages Get Ready as Stock-Index Futures Come to Vietnam

(Bloomberg) -- Tran Hai Ha, chief executive officer of Vietnam’s MB Securities, is looking forward to the start of derivatives trading in the Southeast Asian nation.

Ha, who said his firm has already seen 50 new derivatives accounts opened, said he’s hopeful that figure could rise to 300 by the end of the year. MB Securities, a unit of Military Commercial JS Bank, is one of seven securities firms in the country through which investors will be able from Thursday to buy and sell futures contracts linked to the VN-30 Index, which comprises the 30 largest companies on the Ho Chi Minh City Stock Exchange.

Former Prime Minister Nguyen Tan Dung approved derivatives for Vietnam in 2014, introducing the ability to hedge with the aim of making the nation’s 17 year-old equities market more appealing to foreigners. And in joining other countries in the region that offer futures contracts, including Singapore and Thailand, local officials are also trying to improve Vietnam’s standing with international index compilers.

The market may face “some liquidity issues” in the first year, but will gradually attract both retail and institutional investors, said Trinh Hoai Giang, deputy general director of Ho Chi Minh City Securities JSC, another of the seven firms that applied and were allowed to participate in the new market. A few hundred mostly retail trading accounts have registered with HSC, he said.

About 2,200 derivatives accounts had been created as of Aug. 9, according to Duong Ngoc Tuan, vice general director of the Vietnam Securities Depository, which offers trading support services. That compares with more than 1.8 million accounts in the country’s stock market. Longer-term plans include offering contracts on the HNX-30 Index, which is made up of the 30 biggest companies on the Hanoi Stock Exchange, as well as government-bond futures.

Luring Traders

While the benchmark VN-Index is up 17 percent this year, the best performer in the Southeast Asian region, that may not be enough to immediately lure buyers and sellers.

Institutional investors have expressed interest, but they may also take their time before they begin trading because “when a new product is introduced, many things can go wrong and liquidity will very likely be very low,” said Michel Tosto, head of institutional sales and brokerage at Viet Capital Securities JSC, which also is permitted in the new market.

Tran Tien Dung, a 45 year-old Hanoi-based day trader who’s been in the Vietnamese stock market since it opened in July 2000, said he would not immediately jump into derivatives.

“I still have a lot of questions and would like to stay on the sideline until I get a clearer picture,” Dung said. “As a retail investor, I don’t want to lose money on what I don’t really understand.”

Here’s how the market works:

• Trading will start 15 minutes earlier than the stock market, at 8:45 a.m. local time
• Minimum initial margin set at 10 percent
• Futures are open to foreign and local investors
• Seven brokerages will be allowed to trade: Saigon Securities Inc., HSC, VPBank Securities, BIDV Securities JSC, MB Securities, VNDirect Securities Corp. and Viet Capital Securities JSC
• Trading and trading supervision will be managed by the Hanoi bourse, while clearing and settlement will be under the Vietnam Securities Depository 
• Vietnam JSC Bank for Industry and Trade will be the settlement bank

To contact the reporter on this story: Nguyen Kieu Giang in Hanoi at giang1@bloomberg.net.

To contact the editors responsible for this story: Sam Mamudi at smamudi@bloomberg.net, Divya Balji at dbalji1@bloomberg.net, Cecile Vannucci