Hanoi Stock Exchange: Ready for steps of consolidation

Headquater of Hanoi Stock Exchange

In recent times, the Hanoi Stock Exchange (HNX) has operated effectively in three areas: stock market, the Government bonds market and the derivatives market.

The privatisation of State-owned enterprises has been associated with the Hanoi Stock Exchange from the first days of operation. This activity has made a key contribution to the privatisation process and restructuring of State-owned enterprises, which is the key to increasing goods for both stock exchanges.

In the past 15 years, the HNX has organised more than 500 auctions with more than 3.7 billion winning shares, accounting for 57.8 percent of the total number of shares offered, the total amount of proceeds hit VND 61.8 thousand billion. Of that, there were nearly 200 initial public offering (IPO)s with total value of more than VND 21.7 thousand billion and some 150 auctions of divestment with total value of shares exceeding VND 22 thousand billion.

Statistics showed the scale of capitalisation of this market in general has grown steadily over the years, reaching VND 192 thousand billion, increasing 100 times compared to the end of 2005. Although the liquidity of the listed market of HNX has suffered from many fluctuations, there was still an uptrend.

Besides the development in market size, the change in mechanisms and trading methods (applying continuous auction mechanism, extending trading time in a session, supplement continuous auction mechanism to define opening and closing prices) also boosted liquidity in the market. The value of transactions in a session has reached a record of more than VND 1,000 billion.

To narrow down risky trading activities in the free market, HNX has researched the stock trading market of unlisted public companies (UPCoM). In 2009, HNX launched the operation of UPCoM market after four years of operating the listed stock market.

In 10 years of operation, the HNX proposed and offered flexible solutions to increase the attractiveness for the UPCoM market such as changing the registration mechanism to simplify procedures, change transaction mechanisms, supplement continuous auction mechanism on UPCoM, deploying online transactions and increasing the price fluctuation range from 10 to 15 percent.

With the support of the policy of linking auctions for privatisation of State-owned enterprises with registration of transactions on UPCoM (Circular 115/2016/TT-BTC), UPCoM has made a breakthrough development. Within four years from 2015-2019, UPCoM has increased nearly four times in terms of number of businesses and 15 times in terms of market capitalisation. Currently,UPCoM brings together nearly 900 companies, large and small, diversifying in business lines including big names such as Vietnam Airlines, Viglacera Ceramics Corporation, Vietnam Textile and Garment Group and Vietnam Rubber Group.

In the same year of 2009, HNX launched the specialised bond market and became the only stock exchange in the region which organised both primary bidding activities and secondary transactions. As a result, activity on the Government bond market is increasingly more transparent and liquid and the market has achieved impressive development in terms of both size and depth.

Notably, the secondary market of Government bonds also increased strongly. The listing scale of the market reached 23 percent of GDP in 2019, liquidity reached VND 9 thousand billion per session. In 2015-2019, the value of Government bond transactions increased by 23.3 percent on average and in 2018-2019, average transaction value reached about VND 10,000 billion/day, increasing 2.7 times compared to 2015.

Vietnam's Government bond market is considered the fastest growing among emerging economies in East Asia as well as in ASEAN region with annual growth rate of 30 percent over the past 10 years by ADB. Since 2017, the proportion of repo transactions have surpassed outright transactions, so bonds have become a financial tool not only for holding and earning interest rates but also as a trading tool for profit.

In 2017, the derivatives market was put into operation after many years of researching international experience by HNX, in terms of Vietnam’s market conditions. Trading size has seen rapid growth, in less than three years, 47 million derivative contracts were traded and special derivatives transactions also increased sharply when the basic market suffered strong fluctuations.

The strong growth of the derivatives market, especially the VN30 futures contract, has attracted the attention of foreign organisations, especially exchange trade funds (ETF) investing in the VN30 index had attracted foreign capital. The derivatives market has contributed to completing the structure of Vietnam's stock market, demonstrating its role as a risk prevention tool for underlying securities portfolio and an effective solution to hold capital flowing, avoiding the situation of running away the stock market when the underlying market plummets.