Analysts skeptical about extension of stock trading hours

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Investors at a brokerage firm in Ho Chi Minh City. Analysts have called for market regulators to deal with fundamental problems like liquidity and rampant violations committed by brokerage houses.

Vietnam's stock market regulators plan to extend trading hours as part of a larger restructuring of the market, but many analysts are lukewarm about the move, saying authorities are barking up the wrong tree.

They call for greater focus instead on fundamental problems like liquidity and the rampant violations by brokerage houses.

According to the State Securities Commission of Vietnam (SSC), extension of the trading hours at the two stock exchanges in Hanoi and Ho Chi Minh City has been approved. While further details will be announced later, trading is likely to be extended until 2:15 p.m from 11:00 a.m.

A brokerage director at a HCMC securities company, who wished to remain unnamed, said the market is now in a mess and the first thing to do is to improve its liquidity by adding the afternoon session.

Longer hours could lead to more trading, which in turn would cheer investors, he said.

But Le Ho Khoi, director of Trang An Securities JSC, said things are not that simple. Long hours could just translate into higher operating costs for brokerages, he said.

The real problems in the market now are the low quality of stocks and the lack of confidence among investors, not the trading hours, he said.

When listed companies are struggling with high interest rates and low earnings, it is impossible for the market to recover, he said.

"Investors need to see a stable economy, lower interest rates, and better business performance first before putting money in the market," he pointed out, adding the extended hours "would not mean anything."

Ngo Khanh Hoa, a retail investor, said since market activity remains weak, longer trading hours would have no impact.

What the authorities should do is to deal with securities companies that face insolvency issues and put investors at risk. Investors should be protected or else they would not trade again, he said.

Around 80 percent of brokerages reported losses by the end of the third quarter last year. The number is expected to surge when companies file their financial reports for 2011.

The Vietnam Association of Financial Investors last week proposed cutting the number of brokerages to 25 from 100. Many brokerages have already gone bust, it said, warning that since they continue to manage investors' money, there is a chance that many would lose their money.

Nguyen Hoang Hai, chairman of the association, said the Ministry of Finance and the SSC need to eliminate weak brokerages and delist listed companies incurring losses for many years.

Last December the securities watchdog halted SME Securities Corporation's operations due to its insolvency. According to the Vietnam Securities Depository, the company had frequently violated securities settlement obligations, leading to serious losses for its clients.

The suspension was extended through February 7.

On February 8 the SSC revoked its depository operation license and has given it some time to transfer clients' holdings back to them.

Early rally

Authorities plan to restructure the stock market this year after the benchmark VN-Index slumped 27 percent last year. Various measures have been mulled, including merging the two exchanges, reorganizing brokerages and creating more products for investors.

According to Viet Capital Securities, the VN-Index posted its best January performance since 2007, and the 10.7 percent jump was the biggest one-month gain in the last 12 months.

The mid-January rally was "certainly welcome" following the extreme pessimism of last year, it said.

But Bao Viet Securities said in its latest monthly report that the positive signals pushing up the stock market recently like the economic indicators, considerable foreign flows, and the adoption of a new VN30 Index are for the short term.

Thang Long Securities warned in a note Tuesday that the possibility of higher inflation in February could influence the recovery of the stock market.

"Besides, as the restructuring activities of the banking system and its potential impacts on the economy are still unclear, it may worry investors.

"We continue to believe that waiting for clear positive signals before investing would be a good choice for prudent investors."

The media has reported that the 2011 annual results of many listed firms are bleak.

According to Thoi Bao Kinh Te Saigon Online, most listed companies have filed their results with the two stock exchanges. Up to 60 percent of them reported declines in profits, with at least 85 companies posting losses last year, compared to 50 a year ago.

Around 700 companies are listed on the two exchanges.

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