Derivatives market increases Vietnam’s attractiveness

Vietnam’s stock market has contributed to raising capital for the economy and diversifying the Vietnamese financial market. However, according to Hanoi Stock Exchange Deputy General Director Nguyen Anh Phong, the size of Vietnam’s stock market is small compared to the economy and to regional countries’ stock markets. Demand for development and international economic integration requires Vietnam’s stock market to expand its scale, improve its structure, enhance quality and diversify products in accordance with international practices.

The introduction of the Vietnamese derivative securities market is also expected to provide additional tools to prevent risks and meet investor demand on high-level financial products in Vietnam’s stock market. Authorities hope it will also contribute to attracting more foreign investors and improve liquidity.

According to financial experts, the Vietnamese derivative securities market will offer many opportunities for businesses and investors as the nature of derivative securities is risk prevention. Investors, especially large foreign investment funds, will actively invest in Vietnam’s stock market, contributing to increasing its liquidity, while Vietnamese businesses will be provided with more opportunities to raise capital for their trade and production activities.

In particular, stock and financial investors will have one more option to avoid risks for their investments in the stock market, or directly earn more from price differences when investing in derivative securities.

A derivative is a financial instrument that derives its value or price from underlying assets such as stocks, bonds, currencies and interest rates, as well as commodities and market indices. The most common types of this product are futures, options, forwards and swaps. An advantage of derivative securities is not being restricted in the number of contracts in circulation. Therefore, financial investors can buy or sell derivative securities without the need to own underlying assets.

The derivative securities market is expected to satisfy all forms of investment, from value to short-term speculation. Phong said that in the process of preparations for the launch, a number of international investment funds and banks have already expressed an interest in the upcoming market.

To put the Vietnamese derivative securities market into operation in early 2017, the Hanoi Stock Exchange, together with the Vietnam Securities Depository and its members, have been working hard to formulate legal documents and submit them to the competent authorities.

They are also racing to complete the technical infrastructure, trading system and product designs. As of date, the basic steps have been completed and products are in the testing stage.

The Hanoi Stock Exchange, in coordination with the Vietnam Securities Depository, are working with securities firms and commercial banks to test integration in their systems; organizing conferences and seminars to present the plan on developing the derivative securities trading system; setting up a forum for direct exchange on the derivative securities market; supporting members in building their information technology system; and sharing information with market members on the progress of preparations as well as the requirements for transactions in order to help the Vietnamese derivative securities market operate effectively right from the start.