Vietnam Likely to Raise Stock Trading Band to 7pct on STC: Source

The Ministry of Finance has agreed in principle with The State Securities Commission (SSC)’s proposal to expand stock trading limit on the Hochiminh Stock Exchange to +/-7 percent from current +/-5 percent, the local newspaper Thoi Bao Kinh Te Sai Gon (Saigon Times) reported quoting source familiar with the issue.

However, the timing of the new brand trading introduction has not yet decided. The Ministry of Finance thinks the new trading brand should NOT be applied at the same time with other technical solutions such as longer trading time, market order, T+3 trading introduction.

The wider trading band is expected to improve market liquidity and lure more investments in the stock market amid current sluggish trading.

However, the wider trading band is also seen as double edge knife, it can make the market go further either sides and in the downtrend market, it could cause great turmoil and negative impacts.

Amid current uncertainty, not-yet improving money flows into the stock market, wider trading band may weaken the market faster rather than help it develop stably.

To recall, in 2008 amid global economic crisis, Vietnam had to adjust trading band 4 times in an effort to calm down market panic and limit losses:

On March 27, 2008, trading band on STC was adjusted down to 1 percent from previous 5 percent and trading limit on HNX was cut to 2 percent from previous 10 percent.

Later on April 7, 2008, trading band on STC was raised to 2 percent and on HNX to 3 percent; and trading bands were raised again on July 19, 2008 to 3 percent on STC and 4 percent on HNX. The latest adjustment was made on August 18, 2008 when trading limit on STC was raised to 5 percent and on HNX to 7 percent.

 

Category: Stocks