Vietnam - Stocks end punishing year for businesses

1. The year of shocks

Beginning August 21, the Vietnamese stock market reacted negatively to the arrest of bank millionaire Nguyen Duc Kien, the co-founder of Ha Noi Stock Exchange-listed Asia Commercial Bank (ACB). The VN-Index and HNX-Index plunged with maximum speed during six consecutive sessions. Two months later, the market was shaken again as several officials of the bank were arrested for financial fraud.

Then in November, stocks declined heavily after Sacombank's (STB) chairman Dang Van Thanh resigned amid rumours that the lender would be acquired. The VN-Index lost over 10 per cent from the arrest of Kien, while the HNX-Index dropped around 25 per cent. However, economic policies helped indices rally in December.

2. Improvement in trading regulations

This year also marked the development of new transaction and payment mechanisms. From March 26, the Ha Noi Stock Exchange allowed odd-lot transactions via the negotiation method. Then in June, trading hours were extended to 2.15 pm on both bourses after three months of testing. However, liquidity was not enhanced as expected. In addition, on July 2, the HCM City Stock Exchange applied market pricing to increase the effectiveness of placing orders and boost market liquidity. But the most remarkable change this year may have been the shorter payment period. From September 4, payment time was reduced to T+3 (Trades plus 3 days) from T+4.

3. M&A in the banking industry

Rumours swirled about a merger between Sacombank and Eximbank (EIB), heating up the stock market with massive sell-offs of STB shares. Refrigeration Electric Engineering Co (REE) and ANZ Bank started the divestment from the bank, selling nearly 150 million STB shares. More than 120 shares were sold a few months later, mostly to people tied to Eximbank.

Most recently, Vietinbank (CTG) sold a 20 per cent stake to Japanese Bank of Tokyo Mitsubishi UFJ in the largest acquisition in the banking sector.

4. Building new indices

The VN30 went into operation in February to track the performance of the HCM City Stock Exchange's 30 leading stocks. Five months later, the Ha Noi Stock Exchange introduced a similar index, the HNX30.

This is the first step in creating a standardized procedure for deploying new products.

5. Treasury bill trade on secondary market

After more than 17 years of trading on the primary market, treasury bills began to be traded on the Ha Noi Stock Exchange in August. Including the bills in transactions along with bonds, experts said, would help build a modern bond market.

The total value of Government bonds raised as of mid-December reached VND156.54 trillion (US$7.4 billion), almost doubling last year's figure and exceeding this year's target by VND135 trillion ($6.4 billion).

6. Punishment on short-selling

A punishment for those caught short-selling was set for the first time this year. In late October, the State Securities Commission fined HCM City Securities Co and its officials - Nguyen Viet Xuan and Pham Thi Suong - for lending securities to customers based on the accounts of other clients.

The Commission also sanctioned several other companies, including Dai Nam Securities and Loc Viet Fund.

7. Brokerages terminate membership

Nine securities firms were forced to terminate their membership in the nation's two stock exchanges. These companies (Truong Son, Au Viet, Trang An, Nam An, An Phat, SME, Dong Duong, Sao Viet and Ha Noi Securities Co.) had stopped their brokerage operations, made constant losses and failed to ensure financial safety norms.

8. Viet Nam has three new open funds

Vietnam Active Fund, part of Vietnam Investment Fund Management Co, was the first closed-end fund to turn itself into an open-end fund in December. In addition, the State Securities Commission licensed two other open funds:

Vinawealth and MB Capital Vietnam. Establishing open-end funds was a critical step in restructuring the stock market, forming new investment products and increasing investment from organisations, the commission's vice president Nguyen Doan Hung said.

Source: VNS

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