No perfect solutions for stock exchange congestion: expert

Quach Manh Hao, former deputy director of Military Bank Securities, said the chronic overload at the Ho Chi Minh Stock Exchange (HoSE) has resulted in incorrect selling and buying data, which confuses investors and could eventually scare them away.

HoSE’s system, which has mostly remained unchanged in the last 20 years, has been overwhelmed after a huge number of new investors began trading in recent months.

Many complain about the trouble they have placing buy orders, especially in the afternoon when volumes rise.

While both local and foreign investors are affected, the problem could have a greater impact on the latter, who view Vietnam’s stock market as immature and risky, Hao said.

"They might reduce their investment in Vietnam, at least until the issues are fixed."

Foreign investors have over 35,800 trading accounts, or 1.2 percent of the total number, according to the Vietnam Securities Depository.

They have been net sellers on HoSE for the last 11 sessions.

The proposal to move some stocks to the Hanoi Stock Exchange (HNX) temporarily is a good solution and technically unchallenging, but that depends on whether companies are willing to voluntarily make the move, Hao said.

On the flip side, the impact of the move on the benchmark VN-Index should be considered since investment funds rely on it for their strategies, he said.

Increasing the minimum lot size from 100 to 1,000 is also technically easy, but would have a negative effect on retail investors, he said.

"This will limit participation by new and small investors and affect the government’s target to increase the ratio of investors from 3 to 5 percent of the population."

Nearly 2.88 million Vietnamese investors have trading accounts, or 2.95 percent of the population.

Of all proposed short-term solutions, increasing the lot size might be the "least bad" since it can be done quickly without legal challenges, Hao said.

For the long term a new system must be deployed as soon as possible, and in future authorities should seek to bring the lot size down to 10 or even 1, he added.

"An effective stock market should be accessible to everyone."