Gov­ern­ment set to de­velop de­riv­a­tives mar­ket

Viet Nam News - - BUSINESS -

On the first day of the new year the Gov­ern­ment is­sued Res­o­lu­tion No 01/ NQ- CP/ 2019 for the ro­bust de­vel­op­ment of the se­cu­ri­ties mar­ket, es­pe­cially the de­riv­a­tives seg­ment.

In 2018 the VN-In­dex was down 9.3 per cent, which cre­ated an op­por­tu­nity for the de­riv­a­tives seg­ment to come into its own.

Of­fi­cials from the Haø Noäi Se­cu­ri­ties Com­mis­sion (HNX) said the de­riv­a­tives trans­ac­tion num­bers av­er­aged 78,800 per ses­sion, seven times higher than the num­ber in 2017.

The open in­ter­est num­bers were con­sis­tently ris­ing, reach­ing 21,635 con­tracts by year-end, 2.7 times last year’s fig­ure.

Open in­ter­est is the to­tal num­ber of op­tions and/or fu­tures con­tracts that are not closed or de­liv­ered.

Ex­perts said the main rea­son for the de­riv­a­tives mar­ket’s strong growth last year was the slow­down in the ba­sic se­cu­ri­ties mar­ket.

Traàn Vaên Duõng, the chair­man of the State Se­cu­ri­ties Com­mis­sion of Vieät Nam, told Ñaàu Tö Chöùng Khoaùn news­pa­per that in 2018 the Gov­ern­ment’s stand­ing com­mit­tee, for the first time ever, had to meet to dis­cuss mea­sures to im­prove the sit­u­a­tion since the Viet­namese se­cu­ri­ties mar­ket came into be­ing 19 years ago.

With lit­tle money to be made in stocks, in­vestors in­creas­ingly switched to the de­riv­a­tives mar­ket.

This also had a pos­i­tive im­pact on the ba­sic se­cu­ri­ties mar­ket since in­vestors no longer had to bar­gain away their stocks.

Some ex­perts even be­lieve that the fall in the VN-In­dex was con­tained at 9.3 per cent thanks to the growth of the de­riv­a­tives mar­ket, and could have been worse with­out it.

An­a­lysts said de­riv­a­tives have be­come an im­por­tant tool for in­vestors to hedge risks, and this also ex­plains why the Gov­ern­ment ex­pressed de­ter­mi­na­tion to de­velop the de­riv­a­tives mar­ket in its re­cent res­o­lu­tion.

How­ever a lot of things need to be done to de­velop this mar­ket, ac­cord­ing to ex­perts.

There are three big prob­lems in the se­cu­ri­ties that need to be ad­dressed first, one of which is the lack of in­sti­tu­tional in­vestors.

In­sti­tu­tional in­vestors in­clude banks, in­sur­ance com­pa­nies, pen­sions, hedge funds, REITs, in­vest­ment ad­vi­sors, en­dow­ments, and mu­tual funds.

Now 99 per cent of those par­tic­i­pat­ing in the de­riv­a­tives mar­ket are re­tail in­vestors.

This is dif­fer­ent from other coun­tries where a ma­jor­ity of de­riv­a­tives mar­ket par­tic­i­pants are in­sti­tu­tional in­vestors.

This is one the rea­sons de­lay­ing the launch of a de­riv­a­tive prod­uct in gov­ern­ment bonds, also called g-bond fu­tures con­tracts.

But Vieät Nam still lacks a pol­icy frame­work to de­velop in­sti­tu­tional in­vestors.

An­other prob­lem fac­ing the de­riv­a­tives mar­ket is that it has only one prod­uct – the VN30In­dex fu­tures.

The VN30- In­dex cap­tures the per­for­mance of the top 30 largest stocks on the Hoà Chí Minh Stock Ex­change in terms of mar­ket value and liq­uid­ity.

But the lim­ited num­ber of stocks on the Hoà Chí Minh Stock Ex­change re­duces the pos­si­bil­ity of launch­ing new prod­ucts.

Yet an­other prob­lem is that Vieät Nam still does not of­fer in­vestors tax and other in­cen­tives as many other mar­kets did in their ini­tial stages of de­vel­op­ment.

This prob­lem can be re­solved only by the Gov­ern­ment and Na­tional Assem­bly, the ex­perts said. The

Hoà Chí Minh De­vel­op­ment Com­mer­cial Joint Stock Bank ( HDBank) has ear­marked a pref­er­en­tial credit pack­age worth VNÑ10 tril­lion ( US$ 440.53 mil­lion) for those in­volved in hitech and clean agri­cul­ture around the coun­try.

Loans in the pack­age carry in­ter­est rates that are 1 per cent lower than on nor­mal loans, and bor­row­ers can use as­sets cre­ated with the loans as mort­gage. The tenor of the loans will be up to 10 years.

HDBank said the pack­age is aimed at fos­ter­ing the trend of in­di­vid­u­als and busi­nesses want­ing to in­vest in the pro­duc­tion of green prod­ucts to meet the in­creas­ing de­mand.

It said all en­ter­prises that wanted to de­velop new agri­cul­ture projects us­ing high tech­nol­ogy can get loans un­der this pro­gramme.

HDBank also had spe­cial fi­nan­cial so­lu­tions to en­able the en­ter­prises to di­rectly sup­ply con­sumers with their clean agri­cul­tural prod­ucts and for ex­ports.

Not only HDBank but also many other credit in­sti­tu­tions are be­gin­ning to fo­cus on ecofriendly projects, green prod­ucts and ser­vices and clean and re­new­able en­ergy with an eye on sus­tain­able growth.

NamABank re­cently signed an agree­ment with Global Cli­mate Part­ner­ship Funds – CCPF to carry out a green credit pro­gramme to lend to projects that are friendly to the en­vi­ron­ment and so­ci­ety.

Green credit

The lender’s gen­eral di­rec­tor, Traàn Ngoïc Taâm, told Saøi Goøn Gi­aûi Phoùng news­pa­per that cli­mate change and en­vi­ron­men­tal pol­lu­tion were some of the world’s big­gest prob­lems, and so his bank would like to give a help­ing hand to build a green en­vi­ron­ment and sus­tain­able so­ci­ety through this pro­gramme.

Other banks such as Vi­et­com­bank, Agrib­ank and Vi­et­inbank have also ear­marked con­sid­er­able amounts of money for lend­ing to re­new­able en­ergy projects.

Ac­cord­ing to an­a­lysts, in re­cent years the bank­ing sec­tor has made some ad­just­ments to their credit flows to align them bet­ter with the Gov­ern­ment’s green growth goal.

This is clear from the fact that the bank­ing sec­tor’s out­stand­ing green fi­nance loans have kept in­creas­ing: from VNÑ 180.12 tril­lion ($ 7.93 bil­lion) in the last quar­ter of 2017 to VNÑ235.72 tril­lion ($10.4 bil­lion) in the third quar­ter of last year.

The bank­ing sec­tor is thus play­ing a sig­nif­i­cant role in green in­vest­ment and di­rect­ing credit to eco- friendly sec­tors. Their credit poli­cies, which pri­ori­tise en­vi­ron­ment-friendly prod­ucts, are en­cour­ag­ing bor­row­ers to im­ple­ment green projects rather than those that have a dele­te­ri­ous ef­fect on the en­vi­ron­ment.

But other ex­perts said the bank­ing sec­tor’s green lend­ing was quite lim­ited when com­pared with loans to other sec­tors, par­tic­u­larly real es­tate, which amounted to VNÑ471 tril­lion ($20.75 bil­lion).

The State Bank of Vieät Nam said only 24 green projects had so far this year in­ter­ested banks.

Be­sides, the green loans were given mainly in agri­cul­tural and ru­ral ar­eas, it said.

The ex­perts pointed out the rea­sons for the banks’ mod­er­ate green in­vest­ment, one of which was that bankers were still afraid of bad debt risks.

Ac­cord­ing to an ex­ec­u­tive at a com­mer­cial bank based in HCM City, since green projects take long to break even, are costly and come with high mar­ket risks, the bad debt risks are high.

Tech­ni­cal as­sess­ments of ecofriendly tech­nol­ogy projects are also very com­plex and this is an­other rea­son for banks to be wary about lend­ing to them.

The spokesper­son for the In­ter­na­tional Fi­nance Cor­po­ra­tion in Vieät Nam, an or­gan­i­sa­tion ded­i­cated to help­ing the pri­vate sec­tor within de­vel­op­ing coun­tries, said in Vieät Nam banks’ lend­ing to green projects still faced many dif­fi­cul­ties be­cause of the lack of a proper le­gal frame­work.

Bank­ing in­dus­try in­sid­ers said to en­cour­age banks to in­vest in eco- friendly tech­nol­ogy projects the cen­tral bank should al­low them to use short-term de­posits for long-term loans.

They should also be given re­fi­nanc­ing and re­dis­count­ing pref­er­ences and al­lowed to re­duce the com­pul­sory cash re­serve ra­tio if they lend to green projects.

The cash re­serve ra­tio is the per­cent­age of de­posits banks are re­quired to main­tain in cash with the cen­tral bank.

Ex­perts said to ef­fec­tively de­velop green credit, banks had to spend a con­sid­er­able amount of money on build­ing a so­cial and en­vi­ron­men­tal risk man­age­ment sys­tem and pro­vid­ing pro­fes­sional skills train­ing to their staff.

Be­cause of this, it was nec­es­sary for the Gov­ern­ment to have pref­er­en­tial poli­cies for those banks of­fer­ing green credit and cre­ate close ties be­tween banks, of­fi­cial agen­cies and en­ter­prises, they added. — VNS

Newspapers in English

Newspapers from Viet Nam

© PressReader. All rights reserved.