The State Securities Commission is determined to shorten equities trading times despite foreign banks’ concerns.
The country’s stock market watchdog (SSC) on May 8 issued Notice No83/TB-UBCK which says that from September 4, Vietnam stock market equities investors could sell equities on T+3, or one day sooner than the current T+4 method.
“Implementing T+3 trading will help investors sell a day sooner to better manage risks and partly increase market liquidity,” said Nguyen Son, director of the SSC’s market development division.
T+3 trading means investors can buy stocks then sell three days later, as opposed to four days as in the T+4 method. In order to make T+3 successful, investors must pay money before 4pm on T+2 and receive the equities before 9am the following day and then they can sell the equities during the afternoon of the same day.
Currently, money for payment is transferred in the morning of T+3. Earlier, foreign custodian banks like Deutsche Bank, HSBC, Citibank, Standard Chartered Bank raised alarm bells that their foreign clients were not ready for the new trading method.
The banks claimed it would be difficult to persuade clients to accept T+2 payments and receiving equities on T+3 because money and equities transfers are currently made on the same day.
They noted foreign investors would ask questions like where the rule that money and equities must be transferred at the same time is, and how to ensure the safety of money transferred overnight via BIDV, the designated bank, given the fact that BIDV is a shareholding bank, not a central bank as in developed markets. The third question could be how to safeguard investors’ interests as money is transferred one day earlier, for instance regarding overnight interest rates.
Son said market regulators were aware of custodian banks’ concerns, but the T+3 method would be executed from September 4. “The SSC has regular talks and discussions with foreign investors so the body can explain the changes to them,” said Son.
Bao Viet Securities general director Nhu Dinh Hoa said foreign investors would continue investing in Vietnam’s stock market despite the new policy move. “If they accept to pay money one day in advance, they will have chance to sell stocks one day sooner. That’s positive,” said Hoa.
Leading foreign investment fund management firm Dragon Capital is among the financial institutions wanting T+3, as are some other foreign fund mangers from Japan and Korea.