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NEWS UPDATES Asean Affairs       18  February 2011

Vietnamese investors look at Lao exchange

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Domestic investors are eager to obtain information about the new Lao stock market since the Laos Securities Exchange officially began trading on January 11.

The market – which initially opened with only two listed shares, the Bank for Foreign Trade of Laos (BCEL) and EDL Electric Manufacturing Co (EDL-Gen) – has also attracted interest from foreign investors from Japan, South Korea and China, all drawn by the high profit potential offered by a newly emerging market.

But the attractive investment conditions are making the Lao market especially appealing to Vietnamese investors. The Lao exchange allows investors to open multiple accounts, buy and sell the same shares in a single session (i.e., margin trading), and it takes just two days for shares to reach investor accounts following settlement (T+2).

Vietnamese investors have been waiting for features like these to arrive on the domestic market for the past 10 year.

Last year, the media reported many stories about appeals for new products on the domestic stock exchanges, and members of the Vietnam Association of Securities Businesses (VASB) also prepared a proposal with the support of its almost 100 members seeking official authorisation from market regulators to deploy some of these new products and unleash the trading potential of the domestic market.

Securities companies admit that, although the authorities currently do not formally allow brokerages to open multiple trading accounts for a single investor or provide them with margin trading services, the unlawful use of these tools are quite commonplace in reality.

Nguyen Son, head of stock market development for the State Securities Commission, said that last year, the commission submitted a draft regulation to the Ministry of Finance that would have allowed investors to sell shares on a T+2 basis instead of the present T+4.

However, to deploy this system would requires a number of accompanying products, such as solutions to problems related to settlement and payment and monitoring investor accounts to avoid short selling, Son said.

"We are developing a number of systems to support this service and hope T+2 will soon be authorised," he said.

Other new products, like margin trading and multiple trading accounts, have been included in the draft circular on securities transactions and would soon be submitted to the ministry for likely approval this year, Son added.

HCM City Stock Exchange director Tran Dac Sinh agreed that the introduction of new services could help boost market volumes and the liquidity of shares, but he said it would take time to complete the necessary technology and legal framework.

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