VCN – Relating to activities of derivative securities market that have just officially operated from August 10, 2017, a Customs newspaper’s correspondent had a talk with Dr. Le Xuan Nghia, an economic expert, former acting chairman of National Committee for Financial Monitoring, former commissioner of Government’s monetary policy advisory team.
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There will be 2 purposes that investors invest in the derivative securities market. One is defense and another is jobbery
What do you think about development potentials of derivative securities market that has just operated on August 10, 2017?
The development potentials of the derivative securities market in Vietnam is relatively big, especially when Vietnam is a follower in the development of derivatives market (several decades in comparison with other countries in the world).
Firstly, underlying assets to develop derivative securities market are relatively abundant: stocks, bonds, index, commodities, real estate, etc. At present, Vietnam's derivative securities market has only developed based on 2 underlying asset types which are VN30 Index and bonds.
Second, the types of derivative tools for Vietnam to implement are relatively numerous: option contract, swaps contract, types of debt securities (ABS), etc apart from the type of future contracts as the current time.
Third, the development potentials of the Vietnam’s securities market, in general, is quite large, so the derivative securities market is not an exception. The bond market is still inceptive; stock market still has a great potential when state-owned enterprises implemented the equitization and capitalization of the stock market at a level of only 65% of GDP.
However, all of the above are long term potentials, in the short term, the improvement of the derivative system, legal system, and regulations on derivative transactions, knowledge training for investors is a challenge because the derivatives market is quite complex, poses a high risk and requires advanced knowledge for investors.
Therefore, to develop the derivatives market comprehensively and achieve all the above potentials, it must take a long time.
Compared to the traditional stock market, which risks and opportunities of derivative securities market do the investors have to pay attention to, sir?
Great opportunities are accompanied with great risks. There will be 2 purposes that investors invest in the derivative securities market. One is defense and another is jobbery.
In terms of the purpose of defense, the derivatives market is merely a tool for risk prevention, investors do not attach great importance to the profitability of derivative assets.
For example, a company specializes in KFC chickens, the input material is chicken, if the company is afraid of the increase in chicken price in the coming time, it can buy a sales contract of chicken for the coming time at the current price to avoid the price increase that affects the company's profitability in the future. It is an example of defense.
In terms of the purpose of jobbery, there will be great opportunities (great profitability) accompanied with great risks because the derivative securities have a very large leverage ratio. This is a double-edged sword, which can give a high profitability but can also cause high damage. Therefore, the derivative securities market is for "sophisticated investors" rather than for individual investors or requires advanced knowledge for individual investors.
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In the coming time, what should investors pay attention to, sir?
As I said above, investors should thoroughly study before entering the market (about transaction rules, the operation of derivative assets and features of underlying assets, ...)
By Dinh Thieng/ Huyen Trang