Investors Sniff at Shorter Settlements

A representative of Deutsche Bank told the publication Dau tu Chung khoan (Securities investment) that clients were already struggling to pay up on the T+3 date, even before the T+2 date. The Vietnamese stock market was based on the principle that securities and money were transferred simultaneously. If the process were changed, many foreign investors would be dubious.

HSBC has also raised some concerns. The transfer of payments to the Bank for Investment and Development of Viet Nam (BIDV) were to a settlement bank that has been equitised and no longer enjoyed a Government guarantee. In developed markets, the settlement bank was the central bank, HSBC said.

The bank also raised concern about how overnight interest rates would be set handled if payments were made one day earlier.

In the most recent two months, foreign investors have been quite active on Viet Nam’s stock market, but that trend might reverse if securities regulators did not satisfactorily address these concerns, the bank said.

Representatives of US-based Citibank also said that foreign investors would not be satisfied as their cash accounts would be debited a day sooner than their securities accounts were credited. Risk management was the most crucial principle for foreign investors, the lender said, and they would hardly accept purchase and payment being carried out on different days.

One possible measure that some depository banks have launched was to allow payments by 9am of the T+3 date. They proposed that the Viet Nam Securities Depository Centre complete multilateral clearing procedures during the morning of the T+3 day so that securities would be released to investor accounts in the afternoon.

“As the Vietnamese market cannot be compared with developed markets, there are differences that investors should accept,” said the head of the State Securities Commission’s market development division, Nguyen Son. He also tried to soothe concerns over BIDV as the settlement bank, noting that it would bear great responsibility to the Ministry of Finance, the State Bank of Viet Nam and the commission.