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HNX successful with model “One exchange with three markets”

20:12 | 30/11/2021

VCN – Motivated by the effective operation of three major fields in the stock market, including the shares, Government bond and derivative securities market, the Hanoi Stock Exchange (HNX) has been playing an important role in Vietnam’s stock market.

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Government bond market sees an average growth of 27% per year

Since its inauguration in 2005, and with the opening of share auctions for State-owned enterprises, transactions for every product of the stock market have been carried out.

The model “One exchange with three markets” based on modern technology platforms on the Hanoi Stock Exchange has been implemented and had considerable benefits in building capital investment for the market, businesses and investors.

Regarding share markets, the HNX is managing nearly 1,300 enterprises with a total market capitalization of VND1,726 billion, with about 237.8 shares sold per session. These are each worth VND4,400 billion in the first nine months of 2021. That’s one hundred times higher than at the beginning of the market.

Over the past 16 years, the stock market on the HNX has helped businesses achieve VND290,000 billion through the issuance of shares.

The Government bond market on HNX is considered to be developing quickly and sustainably. Bond bidding has become the main issuance channel with the annual deposit interest rate significantly decreasing and the average term increasing, saving the State budget in terms of interest payments, while actively supporting the State's macroeconomic management.

Due to the efficiency of capital mobilization through bidding, the Ministry of Finance and the State Treasury have increased the use of this channel to mobilize capital for the State budget. From 2009, the annual capital mobilization through the bond auction channel has averaged around VND250 trillion per year.

Government bond transactions on the secondary market are constantly increasing in size and depth, approaching countries with developed bond markets in the region and around the world. By the end of September 30, 2021, the Government bond recorded an outstanding debt of VND1.43 trillion. The volume of bonds sold was valued at VND10,986 billion per session in the first nine months of 2021. The Vietnamese government bond market was assessed by ADB to have the highest growth rate among emerging economies in East Asia with an average growth rate of 27%/year over the past decade.

In addition, the establishment of the derivatives securities market has contributed to perfecting the market structure of HNX as well as completing the operation structure of Vietnam's stock market according to international practices. The derivatives securities market has grown beyond expectations, attracting the attention of domestic and foreign investors.

Opening ceremony of the derivatives market (in 2017).
Opening ceremony of the derivatives market (in 2017).

Although it has only been in operation for four years, the liquidity in the derivatives market is quite active with the average trading volume of more than 205,098 contracts per session in the first nine months of 2021. Especially, the derivatives market had 403,266 contracts. The derivatives market has shown its role as a hedging tool for investors in the underlying market.

Following those results, HNX, together with the Ho Chi Minh Stock Exchange (HoSE) firmly switched to a new operation model, became a member of the Vietnam Stock Exchange, and became perfect examples of Vietnam's stock market.

Establishing an equity market for startups

Vietnam's stock market and the HNX in particular have made remarkable achievements, creating a solid foundation and premise for a new development phase.

Therefore, the HNX aims to continue developing markets in order to make the stock market the main channel of capital for the economy. The HNX will continue to promote the share market and improve the quality of products.

In addition to strengthening solutions to increase stock market liquidity, the HNX is also studying to establish an equity market for start-ups and small and medium enterprises to encourage the development of the private sector.

In particular, the HNX will build the bond market to become the main capital mobilization channel for the State budget, helping raise capital for the country's economic development.

The HNX will focus on perfecting the organization of the bond market, including both government bond and corporate bond markets, improving liquidity in the secondary market, to support issuance activities in the primary market.

To achieve that goal, the HNX will focus on building a modern, highly open technology infrastructure system that can connect to the IT systems of international markets, said the HNX.

Moreover, the HNX will continue diversifying its products in the government bond market, and offer products to hedge interest rate risks in the government bond market.

The secondary corporate bond trading system is also being built by HNX, to improve transparency and fairness for the market. This is also a priority of the Government, to review the conditions for the private placement of corporate bonds in accordance with the principles of information disclosure. To supplement a regulation that only professional investors are allowed to invest in privately-placed corporate bonds. The privately-placed corporate bonds are required to perform centralized registration and depository. The plan to organize the corporate bond trading market has been approved by the Ministry of Finance. HNX is preparing conditions to launch the market.

As for the derivatives market, which has strong growth potential in the future, the HNX will develop this market to become a place that provides hedging tools for investors, as well as an additional investment channel for investors. The HNX is researching to diversify products, not only derivative products based on indices, but also derivative products based on individual stocks. The HNX is also trying to find solutions to promote the diversification of the investor base and develop the institutional investor system.

In addition, with the potential to develop the commodity derivatives market, the HNX will organize a derivatives market on commodities, focusing on Vietnam's strong agricultural products, such as coffee, pepper, cashew nuts, and raw materials such as gas, natural gas and oil.

By Hoai Anh/ Huyen Trang