Wider Trading Band Will Boost Liquidity

The trading band for shares and fund certificates will be widened to ±5 percent from ±3 percent in Ho Chi Minh City and to ±7 percent from ±4 percent in Ha Noi, according to an announced Thursday by the State Securities Commission (SSC). The changes will be effective Monday.

The SSC widens the trading band to boost the liquidity of the stock market

Sai Gon Giai Phong had a talk with Mr. Nguyen Son, head of the Market Development Division of the SSC, about this change. He said the adjustment is aimed at boosting the liquidity of the stock market.

Reporter: What are the main reasons for this adjustment?

Mr. Son: This is the fourth time this year the commission adjusted the trading range of shares. Previous adjustments have resulted in positive effects in the liquidity and share prices, and are the basis for the latest change, Mr. Son said.

The liquidity and the Vietnam Index has improved remarkably since June 20, when the Index dropped to a low of 366 points. The reason for this improvement is that macroeconomic factors in the country have improved. For example, there has been a slow down the rise of consumer prices, a stable exchange rate and an increase in direct foreign investment, he said.

He added that the world oil price has now decreased to US$112-113 a barrel from its record high of US$147 a barrel. The price of gold has also declined.

The widening of the trading range of shares and fund certificates will help investors have better options in making sell orders or buy orders. It will also facilitate business activities of stock companies, according to Mr. Son.

Q: With this adjustment, the Ho Chi Minh City market returned to its initial trading range of ±5 percent. Why did not the Ha Noi market’s price return to its previous range of ±10 percent?
   
A: Because of a difference in standards for listing of shares between Ho Chi Minh City and Ha Noi, price ranges of the two localities are different, too, he said.

The government, the SSC and the Ministry of Finance are planned to set up a stock trading floor for unlisted public companies at the end of this quarter or in early the fourth quarter, said Mr. Son, adding that regulations for this floor will be announced this week or next week and the trade band is expected at 10 percent for this trading floor.

Q: Improved macro economic indexes are the basis for the commission to widen the trading band of shares. So if those indexes become much better, will the commission remove the trading bands?

A: Although the macroeconomics has been improved, there remain some potential challenges, such as increased fuel prices and high lending interest rates. These factors will affect business activities from now until the end of this year. Even at the range of 5 percent, if a market fluctuation occurs, it may have a great impact. So it is impossible to say that the range needs to be more widened.

Q: Will the stock market be better if there are changes in the policies of the State Bank?

A: In my opinion, along with improved macroeconomics, the State Bank needs to change its regulations on compulsory reserves and prime rates to make them more suitable for each period. When such changes are made, they will have a positive effect on business activities.

Stock indexes increase  

During the trading session on Aug. 14, the Ho Chi Minh City market showed positive signs, with 155 stocks up, four decliners and one unchanged. The VN-Index increased by 12.49 points (2.69 percent) to close at 476 points. The trading volume reached 20.7 million units worth VND741 billion (US$45,000). Foreign investors bought 4.4 million units and sold 18 million units

In the Ha Noi bourse, The HASTC-Index increased by nearly four points (2.7 percent). There were 139 gainers, four decliners and three stocks were unchanged. The index ended the session at 146.5 points.

By Ngoc Quang - Translated by Truc Thinh

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