Mar 04, 2021 / 22:45

Securities association expresses concern over prospect of 1,000 shares minimum trading lot

A 1,000 minimum trading lot will limit the participation of small investors, while the stock market is moving towards fairness and equality.

The Vietnam Association of Securities Businesses (VASB) has expressed concern over a proposal of the Ho Chi Minh City Stock Exchange (HOSE) in raising the minimum trading lot to 1,000 shares to ease the overload issue.

 A 1,000 minimum trading lot could reduce 40-50% of the total transaction volume on HOSE. Photo: Cong Hung

“The way out for such issue is to upgrade HOSE’s trading system, and the state authorities should speed up the process as soon as possible,” VASB’s Vice Chairman Phan Quoc Huynh told tinnhanhchungkhoan.vn

According to Huynh, a 1,000 minimum trading lot would limit the participation of small investors, while the stock market is moving towards fairness and equality.

Huynh referred to opinions from some securities firms as saying that the move would cause negative impacts on Vietnam’s stock market.

Meanwhile, a higher minimum trading lot may cause a sharp decline in the trading volume for stocks of firms with large market capitalization in the context of unchanged stock value, said Huynh.

“With expensive stocks, investors may have to spend hundreds of million dong to buy the minimum 1,000 shares,” he said.

Chairman of SSI Securities Corporation Nguyen Duy Hung on his social account gave a more positive view on HOSE’s proposal, saying the trading system would be on the brink of collapse without appropriate measure.

“Raising the minimum trading lot to 1,000 shares is necessary at the moment to keep the system running,” he said, adding when the system upgrading process is completed, the minimum trading lot could be reverted to 10.

Hung said the overload of orders that forces the stock exchange to halt market trading is the result of a rapid-growing stock market that outpace the processing capacity of the stock market, as such, “a long-term solution is a must,” he suggested.

Newly-appointed General Director of HOSE Le Hai Tra previously said more developed markets such as Japan, Taiwan or Singapore had all risen the minimum trading lot.

He estimated a 1,000 minimum trading lot could reduce 40-50% of the total transaction volume, while taking the liquidity to a new level.

In another move, the State Securities Commission of Vietnam (SSC), the country's stock market watchdog, has instructed the Hanoi Stock Exchange (HNX) to process transactions of stocks from the HOSE as another solution to ease the latter’s overload issue.

However, an option to move to the HNX would not apply for stocks under the VN30 Index, comprising 30 largest stocks on the HOSE.

The new change was set to take effect from March 3, 2021 until further instruction from the SSC.

Both before and after the Tet holiday, the overload occurred repeatedly on HOSE whenever liquidity in a trading session hit around VND14-17 trillion (US$608-738 million).

The SSC attributed the overload issue on the HOSE to the transaction processing capacity of the stock exchange that limits the number of transactions per day, while a recent surge of orders has exceeded the expectation of the market.