Things you need to know about Vietnam’s stock market

The year 2017 has marked strong economic growth in Vietnam’s market, with GDP (Gross Domestic Product) going up about 6-7% and it keeps increasing. As a result, Vietnam recently has become Asia’s fastest growing stock market with 100% growth in 5 years.

Here in Vietnam, the stock market differs from the others. As you know, a stock market in the process of transforming from a frontier to an emerging market like Vietnam’s has some special features. So, these are things you need to know before participating in the Vietnam stock market:

1. Insider trading:
   

   Insider trading causes unfairness between investors. So agency regulators and professional associations always try to establish strict laws and high standard of ethics with the aim of reducing insider trading problem.
   Like any other market at the same level, Vietnam’s stock market has been facing this problem also. Although recently, Vietnam Securities Commission has been doing its best to inspect frequently and increase penalties, some cases are still missed. To protect yourself from being a victim, we advise investors to stay away from companies featuring:
   -Information that is regularly released late.
   -The company’s leader and other related persons who frequently register to buy or sell shares.
   -Leadership and other related people who have been punished due to trading stocks without announcing even once.
   -The company is aware of its stock market through regular activities such as buying and selling treasury shares, announcing information to support the share market, and changing from a large audit firm to a small one.

2. Lack of data
   

   It’s not easy to find statistical data on new industries due to the lack of professional organizations that work on it. Even in traditional industries, there are not a variety of surveys to get raw figures. Sometimes the accuracy of data is suspicious to analysts.
   General Statistics Office of Vietnam is one of the best places to seek raw data.
   – http://gso.gov.vn
   Additionally, you can find raw data in some financial websites such as:
   – http://www.cophieu68.vn 
   – http://en.vietstock.vn/

3. The independence, integrity, and objectivity of researches are questioned.
   

   In the Vietnamese stock market, there are more than 70 securities companies, however, ten biggest companies dominate around 75% of brokerage market share. Many small securities companies or financial institutes serve a few particular groups of investors who generate most of their brokerage commission. Due to this, it’s difficult for most small companies and financial institutes to keep the independence and objectivity on their public reports.
   Investors should examine the integrity of recommendation reports. In some reports especially, there are many that do not disclosure enough information of data sources, quantitative model and assumption.

4. High level of herd mentality
   

   In Vietnam, the proportion of individual investors is high, but their knowledge of financial investment is not at the same level. Usually, they do not have enough discipline in their trading systems and let their emotions make decisions. So when something happens leading to overreaction in the market, you should have the right attitude to face it. There may or may not be good opportunities to buy or sell shares.

5. Market makers
   

   Vietnam market makers’ status under the law is uncertain, but they’re still there. We are able to see their presence in some stock tickers. It could be a financial consulting company, a securities incorporation, an investment fund or a sub-fund. They have their own purposes for affecting the volume and price of tickers. But not all stock tickers have market makers behind them and not all market makers have bad intentions.
   In the Vietnam market, they have another negative name for market makers called “driving team” (a group of influenced investors, brokers (sharks), who have the ability to control the price of stocks in the short term). Hearing some rumors relating to the plan of driving teams, investors may try to trade following those rumors, but this normally does not work very well. Investors may receive bad results when buying shares someone is trying to sell at that price point.

6. Foreign Ownership
   

   Foreign ownership is limited by the law in Vietnam. The Vietnamese government does not only limit foreigners on owning real estate such as land, houses, apartments, etc. They also restrict foreigners on possessing a large share of a company, especially strategy industries such as banks, energy, telecom, military, etc. If you invest in a company or an industry in the Vietnamese stock market, you should consider the maximum foreign ownership ratio of the company and the industry that the company belongs to.

Workshop on planning for revising securities law in Vietnam’s stock market

On October 19th, the State Securities Committee of Vietnam had a meeting with the representatives of 13 investment funds of the Association of Asian Securities Exchanges (ATF) and other investors. They discussed how to promote the execution of Decree No. 60/2015 / ND-CP. On top of that, the proportion of foreign investor and non-voting depository receipt are 2 biggest issues which have been impeding foreign investors investing in Vietnam’s stock market. In the meeting, SSC also committed to revising the securities law towards a positive direction.

Tony Bui