Under the SSI financial and monetary report released recently, since the beginning of this year, the stock market experienced two downward periods in February and April, when the liquidity of derivatives grew strongly. SSI said Vietnam’s securities market witnessed a series of widespread nosedives when the number of codes with declines doubling those with increases. All groups of key shares fell sharply, causing a psychological pressure on the overall market.
Transaction value of the derivatives market peaked at VND7.1 trillion on May 3
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However, the value of transactions in the derivatives market increased by three times from the average of more than VND2 trillion (US$87.7 million) in the beginning of April to VND6 trillion ($263.1 million) at the end of the month. It peaked at VND7.1 trillion ($311.3 million) on May 3, approximating the total transaction value of VND7.3 trillion ($320.1 million) in the stock market.
The derivatives market attracted a considerable amount of capital from the stock market, mainly from domestic investors.
Vietnam has opened the derivatives market in a bid to draw more investment to its capital markets since August last year, with futures contracts set to launch first.
In Vietnam, the current law allows three types of derivative products -- futures contracts of shares indexes with the VN30-Index and HNX30-Index as underlying assets, and five-year Government bond future contracts.
The VN30-Index and HNX30-Index capture the performance of the top 30 largest stocks on the Ho Chi Minh and Hanoi stock exchanges in terms of market value and liquidity.
Derivative is a security with price that is dependent upon or derived from one or more underlying assets.
According to the Prime Minister’s direction, since the derivatives market is new and under trial, the VN30 futures contract will be launched first to limit risks, while the HNX30 and Government bond futures will be introduced later, according to the State Securities Commission.
The most important factor for the derivatives market is margin lending. In the derivatives market, an investor must make the deposit in cash or shares at the Vietnam Securities Depository and at market trade members (securities companies) before a transaction takes place.
The current collateral requirements in the derivatives market are 80 percent in cash and 20 percent in shares, but at the initial stage to ensure the highest safety, the margin ratio is set at 100 per cent in cash.
The derivative market is open at 8.45am, 15 minutes earlier than the opening hour of the stock market, and close at 3pm. Prices of products are allowed to fluctuate by +/- 7 per cent and price quotation is 0.1 VN30 index point.
Transaction unit is one contract. The last trading day is the third Thursday in the month of maturity. The month of maturity is the current month, the next month and the last two months of the next two quarters.
