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Vietnam's brokers are anxious for more investment options so anxious that they're taking matters into their own hands


An investor checks stock prices at Ho Chi Minh City Securities Corporation. Many securities firms believe that the market will benefit from new products and risk mitigating measures.

Securities companies are asking authorities to give them more autonomy so that they can diversify their products for the good of the market.

Industry insiders have expressed dissatisfaction that, after ten years of operation, Vietnam's stock market is still limited to just a few basic products such as shares, bonds and fund certificates.

Over the same period, the stock regulator has not approved any new products.

Every time brokerages attempt to launch a new service, they have been ordered to stop. Derivatives like futures and options are not officially available in the country. Investors here are not allowed to buy stocks on margin nor conduct short-selling.

Some securities companies say they want to exercise the freedom to offer financial products that existing laws do not expressly prohibit. The State Securities Commission, in the meantime, argues that it is not the right time to introduce the products.

Speaking at a July conference in Ho Chi Minh City, Vice Chairman of the State Securities Commission Nguyen Doan Hung said eventually Vietnam's stock market will need additional products. However, the appropriate launch time depends on the development of the market; it cannot be rushed.

The Vietnam Association of Securities Businesses has recently asked the State Securities Commission and the Finance

Ministry to legalize margin trading - in which investors borrow money from brokerages to buy shares with a loan of up to 50 percent of the shares' value. The association also wants the authorities to allow investors to open multiple accounts and to both sell and buy the same stock in a trading session if they want.

"All of the nearly 100 members of the association support these requests and we hope that the authorities will facilitate a healthy development of the stock market soon," said Nguyen Thanh Ky, general secretary of the association.

Nguyen Phuc Long, chairman of the Vietnam Industry and Commerce Securities Company, said securities firms should be at liberty to offer services whose risks they can manage on their own. Repurchase or "repo" transactions, for instance, should not be restricted.

Speaking on condition of anonymity, one official from a brokerage firm said delays in legalizing repo transactions, margin trading and multiple-accounts showed that the authorities have not succeeded in managing the market well.

The authorities were concerned about the negative impacts that these products might have on the market's stability. But, since the market has been restricted for such a long time, many companies have broken the rules, making the market even harder to manage, the official said.

In a recent case, Hanoi-based VnDirect Securities Company launched a new options trading service.

The options were offered on around 20 stocks listed in the country's two exchanges. Similar to the option-type derivative in other countries, the product gives the holder the right to buy (call option) or sell (put option) on a stock for a specific price and time period.

This product has not been approved by the stock regulator. Pham Hong Son, a senior official at the State Securities Commission, told Thanh Nien that the agency has not authorized derivatives on the local stock market. Therefore, if securities firms offer such products, they have to take full responsibility for the consequences.

Some experts do not support this type of derivative trading, either. Economist Le Dat Chi said if options are available across the market, the risks can be reduced. However, it will be really risky if only certain firms offer the product under the table.

Economist Le Tham Duong of the HCMC Banking University said options are a risk management instrument that can be used for all commodities including currency, gold, steel and coffee. But when abused for profits, options trading can become a form of gambling.

"Vietnam's stock market is not ready for derivatives like options because of the limitations in management, market size and investors' forecasting abilities," Duong said. "The problem is when it's difficult to identify the real motive behind the use of derivatives, the risks can't be prevented."

Many securities firms believe that the market will benefit from new products and risk mitigating measures.

Diversification would increase liquidity and help investors protect themselves better and give them more options to cut losses, they said. Many among this group have attributed recent market sluggishness to the limited range of products.

Vietnam's share index has fallen 10 percent so far this year.

Ky of the Vietnam Association of Securities Businesses said it's urgent that the authorities start approving "healthy" products provided by securities firms as long as they follow international norms.

If this request is ignored, the association will take matters into its own hands and launch such products after making sure they don't violate existing laws.

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