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According to Dr. Quach Manh Hao, it is necessary to choose the least unfavorable option early because the change is only temporary “but must be done quickly” to solve the congestion.
Mr. Quach Manh Hao used to serve as Member of the Board of Directors and Deputy Managing Director of MB Securities Joint Stock Company for 8 years and witnessed many periods of great growth in the stock market. He is currently Professor of Finance and Banking at the University of Lincoln, UK.
– What consequences do you think the consequences of the congestion in the trading system of the Ho Chi Minh Stock Exchange (HoSE) will have?
– Securities is an information business, so any issue related to the trading system affects the decisions of investors. The current order lock due to the number of orders per day is too much, approaching or exceeding the maximum capacity of 900,000 orders, resulting in incorrect information about price match, overbought and oversold. Investors who do not know current information at the time they have to make a decision should be concerned. And finally, they can choose to leave.
Both domestic and foreign investors run the same risk. But this phenomenon may have a more negative impact on foreign investors because they see the Vietnam stock market as a primitive and risky market. Its global asset allocation strategy could reduce the stake in Vietnam, at least until the problem is fixed.
Investors keep track of the price list on the VNDirect stock exchange. Photo: Quynh Tran.
– The State Securities Commission has approved the mechanism for transferring a number of shares to the Hanoi Stock Exchange (HNX) and HoSE leaders have the idea to increase the trading lot from 100 to 1,000. In your opinion, what are the pros and cons of each option?
– It is a good idea to convert some stocks to trade on HNX because this option is easy to do technically. However, the reality is not simple because it requires time because it is difficult for companies to change floors voluntarily while depending on the law, the opinion of shareholders …
Assuming that many companies agree and perform, the second factor to consider is the effect on the BV index. However, this is also the index that mutual funds rely on when building an investment strategy. This transformation also drags them to change. Next, the factor of the different trading band between the two exchanges is also cause for concern.
The plan to increase the lot from 100 to 1,000 is technically easy and not as legal as the HoSE used to adjust from 10 to 100. The problem is the reaction of individual investors due to them. Feelings of disrespect in independent investing decisions that include the type of shares, the price of the shares and the purchase value. That means they don’t have full market access as big investors.
This plan would limit the market participation of new groups of people who do not have much money and would affect the goal of increasing from 3% to 5% of the population with stock accounts. They will feel hurt because whenever they have a problem, they are not the topic to be heard.
– What do you think of the reactions of the market authorities, in particular the State Securities Commission and HoSE in the search for solutions?
– I think they’re doing everything they can. Because at the same time they had to test the new Korean trading system, negotiate with Thailand to update the existing system, switch and switch exchanges. Troubleshooting an older system in a non-redundant condition takes time.
– Do you have any suggestions for dealing with congestion?
– I honestly think that the current context is too difficult to satisfy the requests of all interested parties at the same time. We need to choose the one that is least disruptive because this change is only temporary. It is temporary, it must be done quickly.
I think the right thing to do is to bring some shares from the HoSE to the HNX, but not to take them off the HoSE. That is, the shares listed on the HoSE are temporarily divided into two exchanges, one of which is from Hanoi. In this way, nothing related to issues such as consulting shareholders, listing regulations, indices and not collecting lots that may generate a feeling of discrimination on the part of investors will not change.
The only thing that needs to change is that the two parties agree on a trading band because currently the HoSE is 7% and the HNX is 10%. This change is in the hands of the Securities Commission because they proposed to merge the two exchanges earlier.
If I had to choose between the current options offered by the Securities and Exchange Commission and the HoSE, I think the temporary lot lifting could be faster and less worse. I emphasize, I prefer to work fast rather than have to go through procedural and legal barriers.
The long-term solution is to implement a new business system as soon as possible. Technology should lead rather than follow. So I think that after these incidents are resolved, regulators need to think about how to reduce the trading lot to 10, or even 1. An efficient stock market is markets that anyone can access if they want to.
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