Investors face losses with bigger stock market trading lot

Since the Ho Chi Minh Stock Exchange (HoSE) raised its minimum trading lot from 10 to 100 earlier this year, Duy Duc in Hanoi has not been able to sell 90 shares that are now worth around VND7.4 million ($319).

This is because his brokerage only wants to buy these shares when their prices fall, to ensure high profits, but this also means that the 29-year-old could see his investment turn into a loss without being able to do anything about it.

"If the HoSE raises the minimum trading lot to 1,000, I might not be able to sell 500 shares of another ticker to the market and that could mean a huge loss," he said, adding that the value of these shares are now VND42.5 million.

Increasing the minimum trading lot is one of the latest proposals made by the HoSE to ease the system overload it has been facing for several months now because of the surging number of investors.

Although the bourse’s CEO Le Hai Tra has defended the proposal, saying that new investors could direct their funds toward exchange traded funds managed by professionals instead of buying big chips on their own to reduce risks, observers say that this goes against the development of the stock market with a level playing field for anyone to make profits.

The proposal means that if someone owns 999 shares of VIC of biggest conglomerate Vingroup, which are worth over VND106 million, they will have to sell them on the market immediately before the new policy takes effect or accept to sell them to brokerages later at a much lower price.

Financial expert Dinh The Hien said that after 20 years of existence, the HoSE still struggles to attract small investors due to the limited technical capabilities of its system.

The State Securities Commission of Vietnam (SSC) in the past had given each share a face value of VND10,000 and allowed a minimum trading lot of 10 shares. This sought to attract all types of investors regardless of their limited financial capability, he told local media.

Increasing the lot size to 1,000 shares is unacceptable and goes against the trend of developed markets, he said.

Before 2014, Japan had eight different lot sizes, which were reduced to two lots of 100 shares and 1,000 shares, but starting in October 2018, there is only one lot size of 100 shares.

In 2019, the Tokyo Stock Exchange even considered bringing the lot size down to one share to attract even more investors.

Singapore used to have a lot size of 1,000 but brought it down to 100 in 2015.

Other experts are concerned that the lot increase will chase many investors away from the market as around 35-40 percent of investors have a capital of VND300 million or less, according to the Vietnam Association of Financial Investors (VAFI).

"Even increasing the lot size to 1,000 does not guarantee that the overload issues will be resolved on the HoSE," said Nguyen Hoang Hai, deputy chairman of VAFI.

But other experts say that a quick solution is needed to resolve the urgent issues.

Quach Manh Hao, former deputy director of Military Bank Securities, said that the lot increase will be a quick solution to temporarily resolve the overload issue while HoSE works on more permanent measures to improve its system.

"I support quick solutions which do not require going through much legal and administrative challenges," he said, adding that no immediate solution will be able to satisfy all investors.