Vietnam to offer covered warrants to attract foreign investment

The Ho Chi Minh City Stock Exchange plans to introduce covered warrants trading on June 28, Bloomberg reports. The move is widely seen as an effort by the Vietnamese government to encourage foreign investment and boost the market’s liquidity.

The liquidity of the Vietnam’s stock market is still “very small,” according to Nguyen Duc Thong, director of derivatives at SSI Securities Corp., the country’s largest brokerage. Mr Nguyen sees this as a step in the right direction, signaling Vietnam’s willingness to try new products.

SSI is among fewer than ten securities firms that have registered to issue covered warrants so far. Others include VNDirect Securities and HSC Securities. Twenty-six stocks can be used as underlying equities for covered warrants, including SSI Securities Corp, FPT Corp, and Refrigeration Electrical Engineering Corp.

According to Bloomberg, Vietnam is set to see net inflows from foreign investors for the third consecutive year in 2019. Despite this, the stock market is still dominated by local retail investors. Officials hope expanding Vietnam’s product offerings would help boost foreign investment.

The move to introduce covered warrants trading is also expected to diversify investment products in the stock market, provide tools to prevent risks for investors, and help Vietnam gain an MSCI Inc. upgrade from frontier level to emerging-market status.

Vietnam has previously taken steps towards further market liberalization, such as reducing limits on foreign ownership and reducing government stakes in companies. Last month, the government announced it has completed amending its Securities Law, to take effect January 2021.

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