Vietnam Hopes to Lure Foreign Market Investors With New Products

(Bloomberg) -- In a drive to continue attracting overseas investors, Vietnam is expanding its product offerings by introducing covered warrants on the Ho Chi Minh City Stock Exchange in about two weeks.

It is the latest step taken by Vietnamese authorities, who want to increase the market’s liquidity by appealing more to foreign funds. They previously lowered foreign-ownership limits for some industries, are working to speed up the process of reducing government stakes in companies and opened a derivatives market in 2017. They also announced the start of government bond future contracts trading next month and the government is overhauling its Securities Law.

“This is a signal that Vietnam’s policy is changing and becoming more open to new products,” said Nguyen Duc Thong, director of derivatives at SSI Securities Corp., the country’s largest brokerage. Covered warrants are expected to help boost the market’s liquidity, which is still “very small,” he added.

The reforms are also aimed at helping Vietnam garner an MSCI Inc. upgrade to emerging-market status from its current frontier level.

SSI will issue 6 covered warrants codes based on four underlying shares -- FPT Corp., Mobile World Investment Corp., Hoa Phat Group and Military Commercial JSB, said Thong, who believes the new product will attract more institutional investors and make domestic retail investors more sophisticated.

The Ho Chi Minh City Stock Exchange, the country’s main bourse, plans to start covered warrants trading June 28, the State Securities Commission said last month. This will help diversify investment products in the stock market, provide tools to prevent risks for investors and boost foreign investment inflows, according to the market regulator.

The benchmark VN Index has gained 7.8% this year after falling 9.3% in 2018. The measure lost 2% in May, its biggest monthly loss since December as intensifying trade tensions hurt market sentiment. Foreign investors have bought a net of $343 million worth of Vietnamese shares this year through June 10, according to data compiled by Bloomberg. That’s compared with net foreign inflow of $1.8 billion in 2018 and $1.08 billion in 2017.

Still, local retail investors dominate stock trading in Vietnam.

Less than 10 securities firms have so far registered to issue covered warrants, including SSI Securities, VNDirect Securities and HSC Securities. Twenty-six stocks can be used as underlying equities for covered warrants, according to the Ho Chi Minh City bourse, including:

• Refrigeration Electrical Engineering Corp.
• SSI Securities Corp.
• FPT Corp.
• Masan Group Corp.
• Mobile World Investment Corp.
• Military Commercial JSB

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

To contact the editors responsible for this story: Divya Balji at dbalji1@bloomberg.net, John Boudreau

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