New circular helps perfect financial products and stock market: expert

The State Securities Commission’s draft circular to replace an older one on the guidelines for securities trading is in line with modern trends, perfecting financial products and their diversities, adjusting trading time to suit the needs of domestic and foreign investors, said an expert.

new circular helps perfect financial products and stock market: expert hinh 0
The State Securities Commission and securities companies should build a proper legal framework, a list of stocks eligible for short sale transactions and a standardised clearing systems to avoid systemic risks. (Photo: tinnhanhchungkhoan.vn)

“Both individual and institutional investors are looking forward to the approval and issuance of this circular,” according to Phan Dung Khanh, director of investment consultancy department at Maybank Kim Eng Securities Co Ltd.

“This is definitely positive news for Vietnam’s stock market as the move is expected to propel the local stock market to emerging market (EM) status,” Khanh told the Vietnam News Agency.

Under the draft circular, investors are allowed to perform short sale transactions, which, according to Khanh, is a good step helping investors diversify their short trading strategies.

The draft said short sale transactions with collateral (secured short sales) were transactions for borrowed securities in the securities borrowing and lending (SBL) system of the Vietnam Securities Depository. The seller is then obliged to buy back the securities to repay the loan. The short sale will be executed based on the securities loan transaction contract on the securities loan and lending system at the Vietnam Securities Depository.

A secured short sale transaction must include collateral, borrowing/lending interest rate, loan term, extension, collateral disposal when the investor does not make payment of securities, settling method when a dispute arises, potential risks and losses, and the costs.

Khanh said the State Securities Commission and securities companies should build a proper legal framework, a list of stocks eligible for short sale transactions and a standardised clearing system to avoid systemic risks.

They should also effectively upgrade infrastructure systems, prepare private contracts with customers and improve the instruction of new product information, he said.

Under the draft, a person aged from 15 years old to under 18 years old, who has not lost or limited their civil act capacity, is entitled to open a securities account provided that the consent of the legal representative is obtained.

Commenting on this regulation, Khanh said that the popularisation of securities and knowledge for investors, including those aged 15 and over, is necessary.

“People from 15 years old are able to access securities investment channel and can have correct assessment on this attractive investment channel and capital mobilisation. We can apply the regulation to the underlying stock market or some kind of high quality bonds,” he said.

“However, some complex or advanced financial products such as futures contracts or option contracts may not be applicable to young investors,” he said.

According to lawyer Nguyen Thanh Ha, Chairman of SBLAW Law Firm, the stock market is a potentially risky investment channel that requires knowledge and experience, thus its may be difficult for individuals aged 15 years to 18 to properly participate in transactions by themselves.

“Besides, most securities companies currently stipulate the minimum age for opening a securities account is 18 years old,” Ha said.

VNS/VNA