BTA
30-05-2008, 04:29 PM
Deputy Chairwoman of the State Securities Commission (SSC) Vu Thi Kim Lien said that SSC is discussing adjusting the daily trading bands and it will make an announcement about the commission’s final decision.
Lien said during a workshop to discuss solutions to the stock market yesterday afternoon in Hanoi that enlarging daily trading bands seems to be the most suitable solution for now.
Lien said that if SSC decides to enlarge the trading bands gradually, it will make announcements about the adjustment plan. If SSC decides to resume the initially applied trading bands, it will make an announcement about from which trading session the initial trading bands will be applied.
According to Lien, adjusting daily trading bands is within SSC’s jurisdiction; however, SSC will report to and request the opinion of the Ministry of Finance, because, as Lien said, the decision “will have big impacts on the market”.
The daily trading bands on HCM City and Hanoi trading floors were lowered to 1% and 2% (from 5% and 10%) respectively in March to prevent stock prices from sliding sharply. The trading bands were later raised to 2% and 3% on April 7 in order to improve the liquidity of the market. When the trading bands were lowered, SSC’s leaders committed to resume the initially applied trading bands as soon as the market looked like it was turning around.
Lien said that SSC once discussed the application of the lop-sided daily trading bands with the HCM City Stock Exchange and Hanoi Securities Trading Centre. However, SSC’s leaders think that it is not for sure that the solution will help the market develop in a sustainable way.
“There is no guarantee that the lop-sided trading bands will work,” Lien said.
It is true that some other countries have been applying lop-sided daily trading bands, but only when the market witnesses overly hot development and the macroeconomy shows good conditions.
Recently, the Vietnam Association of Finance Investors (VAFI) suggested a series of solutions to the stock market’s problems, including the application of the lop-sided trading bands of -1% and +3% on both Hanoi and HCM City trading floors.
A lot of securities companies have also voiced the same proposal to adjust the daily trading bands in order to improve the liquidity of the market.
The companies all think that the solution of narrowing daily trading bands has passed and now the market needs more favourable conditions to help improve liquidity.
Ngo Phuong Chi, Deputy General Director of Bao Viet Securities, said that the daily trading bands should be widened to the initial levels of +/-5% and +/-10%.
“With the current daily trading bands, the market’s liquidity is very low. Previously, the trading bands needed to be narrowed to avoid shocking decreases. Now the market has got used to shocks, the trading bands need to be widened to improve the liquidity,” he said.
A representative of Saigon Securities Incorporated also said that the narrow trading bands could not help rescue the market, therefore, it is necessary now to resume the initially applied trading bands.
Hoang Xuan Quyen, Analysis Director of Tan Viet Securities Company, said that narrowing trading bands should be seen as a double-edged knife, which is like the import-export quota scheme or the ceiling interest rate scheme.
Lien with SSC said that it is really a difficult job for SSC to decide whether to resume the initially applied trading bands. “What will happen if the trading bands are widened and the stock prices drop further and more sharply?” she asked.
Lien said during a workshop to discuss solutions to the stock market yesterday afternoon in Hanoi that enlarging daily trading bands seems to be the most suitable solution for now.
Lien said that if SSC decides to enlarge the trading bands gradually, it will make announcements about the adjustment plan. If SSC decides to resume the initially applied trading bands, it will make an announcement about from which trading session the initial trading bands will be applied.
According to Lien, adjusting daily trading bands is within SSC’s jurisdiction; however, SSC will report to and request the opinion of the Ministry of Finance, because, as Lien said, the decision “will have big impacts on the market”.
The daily trading bands on HCM City and Hanoi trading floors were lowered to 1% and 2% (from 5% and 10%) respectively in March to prevent stock prices from sliding sharply. The trading bands were later raised to 2% and 3% on April 7 in order to improve the liquidity of the market. When the trading bands were lowered, SSC’s leaders committed to resume the initially applied trading bands as soon as the market looked like it was turning around.
Lien said that SSC once discussed the application of the lop-sided daily trading bands with the HCM City Stock Exchange and Hanoi Securities Trading Centre. However, SSC’s leaders think that it is not for sure that the solution will help the market develop in a sustainable way.
“There is no guarantee that the lop-sided trading bands will work,” Lien said.
It is true that some other countries have been applying lop-sided daily trading bands, but only when the market witnesses overly hot development and the macroeconomy shows good conditions.
Recently, the Vietnam Association of Finance Investors (VAFI) suggested a series of solutions to the stock market’s problems, including the application of the lop-sided trading bands of -1% and +3% on both Hanoi and HCM City trading floors.
A lot of securities companies have also voiced the same proposal to adjust the daily trading bands in order to improve the liquidity of the market.
The companies all think that the solution of narrowing daily trading bands has passed and now the market needs more favourable conditions to help improve liquidity.
Ngo Phuong Chi, Deputy General Director of Bao Viet Securities, said that the daily trading bands should be widened to the initial levels of +/-5% and +/-10%.
“With the current daily trading bands, the market’s liquidity is very low. Previously, the trading bands needed to be narrowed to avoid shocking decreases. Now the market has got used to shocks, the trading bands need to be widened to improve the liquidity,” he said.
A representative of Saigon Securities Incorporated also said that the narrow trading bands could not help rescue the market, therefore, it is necessary now to resume the initially applied trading bands.
Hoang Xuan Quyen, Analysis Director of Tan Viet Securities Company, said that narrowing trading bands should be seen as a double-edged knife, which is like the import-export quota scheme or the ceiling interest rate scheme.
Lien with SSC said that it is really a difficult job for SSC to decide whether to resume the initially applied trading bands. “What will happen if the trading bands are widened and the stock prices drop further and more sharply?” she asked.