|Nguyen Manh Cuong
On December 21 2015, the Vietnamese Ministry of Finance
issued Circular 203 as a guide on trading securities on
regulated securities exchanges. It will come into force on July
1 2016 and replaces Circular 74 of the Ministry of Finance,
dated June 1 2011.
Under Circular 74, foreign investors can conduct margin
trading (or, buy securities with money borrowed from a
securities company, on the condition that the securities are
used as collateral for the loan). However, pursuant to article
9.4 of Circular 203, foreign investors will not be permitted to
conduct margin trading from July 1 2016.
Decree 58 of the Government, dated July 20 2012 (as amended
by Decree 60 of the Government, dated June 26 2015) provides
detailed guidelines for the implementation of a number of
articles of the Law on Securities. Article 2.21 defines foreign
investors as including: (i) individuals holding foreign
citizenship; and, (ii) organisations established in accordance
with a foreign law (other than Vietnamese law).
To prepare for the implementation of Circular 203, several
securities houses have announced that from July 1 2016, they
will stop opening new margin trading securities accounts for
foreign investors. Those who have already opened and maintained
a margin trading securities account will not be allowed to buy
any more securities; they will only be able to sell down the
securities to pay down loan(s) with the securities houses.
It is expected that Circular 203 will have a limited impact
on Vietnamese securities markets because not many foreign
investors have engaged in margin trading.
However, according to the Vietnam Securities Depository
(VSD), as of April 2016, 19,016 foreign investors have been
granted securities trading codes. (In order to trade in
securities listed on Vietnam securities markets, foreign
investors must have a securities trading code, together with a
securities trading account opened through a securities house
and a cash account opened with an authorised commercial bank in
Vietnam). Of these, 2,908 are institutional investors and
16,108 are individual investors. In particular, 496 foreign
investors received securities trading codes in April 2016
alone. This was an increase of 140% in comparison with the same
month last year.
Thus, there may soon be a greater demand for margin trading
from foreign investors, when the securities markets recover. It
is hoped that the Ministry of Finance will reconsider the risks
and rewards of removing the ban on margin trading for foreign
Nguyen Manh Cuong