How to trade stocks understanding the operations of vietnamese stock markets (at HNX)

Stock Exchange Hanoi Stock change Notice the ture of the ex- change: stock market, bond market, and UP- COM struc-Type of transaction; type of order Trading time and trading session Pric

Date: Tuesday, May 24, 2016

Project work (ASSIGNEMNT 2)

Ministry of Education & Training National Economic University

How to trade stocks? Understanding the operations of Vietnamese stock markets

Stock Exchange

Hanoi Stock change

Notice the ture of the ex- change: stock market, bond market, and UP- COM

struc-Type of transaction; type of order

Trading time and trading session

Price change step and limits

Summary of information disclosure

re-quirements

Operations and index performance in

2014, 2015 (listing, trading volume,

A- INTRODUCTION

Hanoi Stock Exchange (HNX) was born in accordance with Decision

No.01/2009/QĐ-TTg by Prime Ministeron the basis of transforming and ing Hanoi Securities Trading Center which was established upon Decision No 127/1998/QĐ-TTgand launched on 08/03/2005 On 24/06/2009, the HNX was in-augurated as a State-owned single - member limited liability company with the Ministry of Finance as a representative

Being an organizer and regulator of the securities market, the HNX has nized share auctions, Government Bond biddings to mobilize capital for the State budget In parallel, the HNX has operated three secondary trading markets on a modern technological structure, including listed stock market, Government Bond market, and UPCoM (Unlisted Public Company Market)

The optimal goal of the HNX is to operate an transparent, equitable and cient market, develop new products, attract domestic and foreign investments, and prove itself as an important capital mobilizing channel of the economy, ensuring the interest of investors and market participants

effi-B- ANALYSIS

I Listing requirements [1]

When a company issues its stock to the stock market, it need to follow the eral regulations There’re some requirements for listing in HNX:

gen-1 Conditions for stock listing

- Being a joint stock company having the minimum charter capital of VND 30 billion or more ; calculated at book value at the time of application for listing;

- There is at least 01 year of operation in the form of Joint Stock Company by the time of registration for listing; return on equity (ROE) of the latest year is at least 5%; there is no overdue debt for more than 01 year; there is no accumulated loss as

of the year of listing registration; all financial obligations to the State must have been discharged;

- At least 15% of the voting stocks of the company held by at least 100 ers who are not principal shareholders;

sharehold Shareholders being members of the Board of Directors, Supervisory Board, the Manager or General Manager, the Deputy Manager or Deputy General Manager and the Chief Accountant of the company; or connected person with Board of Di-rectors, Supervisory Board, the Manager or General Manager, the Deputy Manager

or Deputy General Manager and the Chief Accountant of the company must mit to hold 100% of their shares for a period of 6 months from the listing date and 50% of the shares for the following 6 months excluding the stocks under the state ownership owned by the above individuals representing to hold

com There is valid dossier of stock listing registration as prescribed

2 Conditions for bond listing

- Being a joint stock company, limited liability company or State owned enterprisehaving the minimum charter capital of VND 10 billion or more calculated at book value at the time of application for listing;

-The business result of the preceding the year must be profitable;

- At least 100 persons own bonds which are issued in one round

- All bonds of one issue must have the same maturity date

- There is valid dossier of bond listing registration as prescribed

II Type of transaction; type of order

1 Type of transaction:

- Continuous order matching method: is the method in which the system will

automatically match buy orders will with sell orders right after they are put into thetrading system

- Periodical order matching method: is trading method executed by trading

sys-tem where buy and sell orders are correspondingly matched at a specific point of time

- Negotiation method: is the method whereby buyers and sellers negotiate with

each other on the transaction conditions in advance, then the trading result will be placed into the trading system

2 Type of order:

- Limit order (LO):is an order to buy or sell a stock at a specific or

better price Better price is the price higher than the specific price in case

of sell order and lower than the specific price in case of buy order LO is entered into the trading system in continuous order matching and predio-cial order matching

- Market order: is the buy order at the lowest sell price or the sell

order at the highest buy price available on the market

Market order is only entered into trading system in the continuous order matching session

3 Types of market orders:

+ The Market To Limit order (MTL): is a market order in case it is not

fully executed, the remainder of the order is changed into litmit order In case of buy order, the remainder of the order is changed into buy limit or-der with the price either one (01) tick higher than the previous match price or ceiling price if the previous match price is ceiling price In case

of sell order, the remainder of the order is changed into sell limit order with price either one (01) tick lower than the previous match price or the floor price if the previous match price is the floor price

+ Match or Kill order (MOK): is a market order which will be killed

right after entering into the trading system if it is not fully executed

+ Match and Kill order (MAK): is a market order which may be fully or

partially executed, the remainder of the order will be killed right after the order matching

+ At The Close order (ATC): is a buy or sell order at the close price.

ATC order is only entered into the trading system in the periodically der matching session After the matching period, fully or remaining unex-ecuted order will be killed

or-III Trading time and trading session [2]

1 Trading time of listed stock market:

sion Negotiation 9:00 am – 11:30 am

Afternoon session

Continuous order matching 1:00 pm – 2:30 pmPeriodical order matching for

closing session

2:30 pm – 2:45 pm

Negotiation 1:00 pm – 3:00 pm

2 Trading time of UPCoM:

Morning sion

ses-Continuous order matching 9:00 am – 11:30 amNegotiation 9:00 am – 11:30 am

Afternoon session

Continuous order matching 1:00 pm – 3:00 pmNegotiation 1:00 pm – 3:00 pm

HNX organizes trading from Monday to Friday every week (except for days as regulated in the Law of Labor)

holi-IV Price change step and limits (HNX)

 Price change step : +/-10 %

Price range for stock is calculated as below:

• Ceiling price = Reference price + reference price x price collar

• Floor price = Reference price – Reference price x price collar

 After the above adjustment, if ceiling/floor price of stock

is still equal to reference price, then there is adjustment as follows:

+Adjusted ceiling price = Reference price + one quotation unit +Adjusted floor price = Reference price – one quotation unit

2 BOND MARKET [3 ]

Exchange unit with bond matched transaction are 100 bonds

Don’t regulations exchanges unit with bond transaction agreement

Weigh minimum exchange with transaction agreement are 1000 bonds Bond exchange weigh 1-99 bonds

Don’t apply price change step with bonds

3

UPCOM [4]

Weigh minimum exchanges are 10 stocks or 10 bonds

- Price quotation units + stocks : 100 Dong and don’t apply price quotation units with bonds Denominations are 10,000 Dong/stock and 100,000/bond

- Price change step[5] : +/-15% with stocks and it can change during in uct time

prod-V Summary of Information disclosure requirements

(1) Information disclosure entities

Information disclosure entities on Hanoi Stock Exchange (HNX) include:

1 Listed institutions;

2 Trading registration institutions ;

3 Member securities companies;

4 Institutions or individuals who implement the tender offer for listed/registered shares at HNX;

5 Principal shareholders, founding shareholders, PDMRs, officer authorized to disclose information and connected persons of these objects according to Clause

34, Article 6 of Securities Law

(2) Information disclosure requirements

1 The information disclosure must be sufficient, accurate and timely as stipulated

by law Information disclosure entities are responsible for the information closed

dis-2 The information disclosure of institutions who are Information disclosure

enti-ties as at Article (One) of this regulation must be performed by the legal

represen-tative or the officer authorized to disclose information

2.1 In case Information disclosure entities as at Clause 1, 2, 3 of

Arti-cle (One) of this regulation disclose information, these entities must register the

authorized information disclosure officer with HNX according to the form at pendix I of Circular No 52/2012/TT-BTC issued on 05/04/2012 by Ministry of Fi-nance, and concurrently send the list of persons related to information disclosure officer (according to the attached form CBTT/SGDCKHN-01) with the CV of in-formation disclosure officer within ten (10) working days since the authorization takes effect

Ap-2.2 In case Information disclosure entities as at Clause 4, 5 of Article

(One) of this regulation authorize listed institutions/ trading registration

institu-tions/ member securities company or depository member to implement the mation disclosure under the approval of State Securities Committee (SSC), these objects must notify in writing (according to attached form CBTT/SGDCKHN-02) with authorization letter/ valid authorization contract as stipulated by law

infor-2.3 In case of changing institutions, individual authorized to disclose information, Information disclosure officers as at Point 2.1 and 2.2 above must no-

tify in writing (according to attached form CBTT/SGDCKHN-03) at least five (05)working days before expected changing date.

3 Information disclosure entities as at Clause 1, 2, 3 of Article (One) of this

regu-lation implement the information disclosure on their own means of disclosure and concurrently send the information to HNX and SSC to report

4 Information disclosure entities as at Clause 4, 5 of Article (One) of this

regula-tion must send the informaregula-tion to listed instituregula-tions/ trading registraregula-tion instituregula-tionsand HNX and SSC simultaneously to report when implement the information dis-closure Founding shareholder in the limited transfer period must report addition-ally to Vietnam Securities Depository

5 Information disclosure entities as at Clause 1, 2, 3 of Article (One) of this

regu-lation must register with HNX for the contact information including: address, tel., fax, email, etc In case of changing registered information, Information disclosure entities must notify in writing (according to attached form CBTT/SGDCKHN-04)

at least three (03) working days before the expected changing date

6 The date of information disclosure is the date that information appears on the

website and/or annual report, other publications of Information disclosure entity Information disclosed on the website must specify disclosure time (date, hour)

7 The report date about the information disclosure is the date when Information

disclosure entities send electronic data through the CIMS system, email, date of sending fax, date of HNX receiving information disclosed in writing according to Dispatch mark of HNX

In case Information disclosure entities must send report in writing and electronic data simultaneously, the report date is the date when HNX has received both of thereports

8 The language of the disclosed information must be Vietnamese In case required

by law that the disclosed information can be supplemented by other languages, the languages of the disclosed information include Vietnamese and other languages as stipulated by law The words of disclosed information must be clear, easy to under-stand and avoid misleading for shareholders and investors

9 The disclosed information must be exact with the form promulgated together

with Circular No 52/2012/TT-BTC, this regulation and others related In case formation disclosure entities send information to HNX with wrong form or missingsome information as requirement, HNX will not disclose information on means of disclosure of HNX

In-10 In case there is any change in the content of the disclosed information,

Infor-mation disclosure entities must report and send written explanation to HNX and SSC

Additionally, means of information disclosure, rules on information

disclo-sure documents, delivery method of information disclodisclo-sure documents, ment of information disclosure and storage of information,… so on, all thesepresent in law securities, circular on guidelines for information disclosure on secu-rities market by Ministry of Finance together with Decision No 250/QD-SGDHN

postpone-on 06/06/2013 by Chief Executive Officer of Hanoi Stock Exchange.

VI Operations and index performance in 2014, 2015

 2014

Overall about economic in 2014

2014, although strongly influenced by fluctuations in the political and economic world, but Vietnam's economy remained strong growth:

_GDP growth reached 5.98%,

_Inflation was curbed at 4.09%,

_Reduced interest rates and exchange rate stability

_Production and business activities of enterprises have good signs when enue and profit rose again

rev- The recovery sign of macro economy has helped the stock market prospering

6.1(a) Listed stock market in 2014

a) Listed scale:

_ The total value of new listed increased by 169.5%

_ A total of 365 listed companies with a total listed value of over 93,247 billion until 31/12/2014, increase 6.58% compared to 2013

_ 13 companies new listing in2014 , new listed volume 307.749.531 and new listed value 3,077,495,31

=> Flourishes stock market also created favorable conditions for enterprises to raise capital by issuing shares on the stock market

_ However, 25 delisted enterprises with delisted volume 213,557,356 shares and delisted value 2,135,573.56 VND, increase 14,62% compared to 2013

_ 59 companies which list additional shares with a total value of additional listed 4818 billion VND with additional listed volume 481,85,984 shares , up 14.62% over the previous year.

_ Revenue and profit from production and business activities of listed prises on the Hanoi Stock Exchange has risen again Enterprises dramatically re-duce credit loans, reduce management costs

enter-b) Trading scale :

_The average trading value in session increased by 146%

_ The trading scales of market rose strongly, average trade volume reached 68.75 million shares / session, the trade value reached 807.8 billion / session (in-crease 62,53% about trading volume and 146,04% about trading value compared to2013)

_ With 247 trading sessions, the market has 145 rallied sessions, 99 declined sessions, and 3 sesions no volatility, the HNX Index rose total 15.14 points ( in-crease 22,32% compared to the end in 2013) , and reached the highest level 92.99 points in session on 24/03/2014, HNX- index lowest 67.93

_ The value of market capitalization at the time of 31/12/2014 reached 136,017 billion VND (up 27.27% compared with the end of 2013) Transactions of the 10 stocks having the largest capitalization of the market was fairly active, reaching over 2,944 million shares, corresponding to a value of 49 919 billion VND, repre-senting approximately 17.34% of trading volume and 25.02% of the total market trading value

6.2 (a) The registered trading unlisted public companies market (UPCoM)

a Registered trade scale :

_ The total registered trade value increased 332.2%

_ In 2014, UpCoM has also many positive changes Production and business tivities of enterprises were improved, the enterprise makes a profit increase de-voted to the previous year

_ UpCoM had 36 new businesses which registered for trading shares with the registered trading value reached more than 5717 billion VND ( increase 332,2% compared to 2013) and new registered trading value 5,717,355.83 VND

_ UPCoM market has 169 registered trading company with the registered ing value reached 24,118 billion VND ( increase 18,1% compared to 2013) with

trad-total registered trading volume 2,411,856,037 shares

_ 12 companies registering additional trading with additional registered ing volume are 35,815,818 shares and additional registered trading are 357,158.18VND

_ 9 companies canceling share trading with share volume canceling registeredtrading are 237,703.156 shares and share value canceling registered trading are 2,377,031.56 VND

b Trading scale:

_The average trading value in a session increased by 972.25%

_ The average trading volume in a session increased by 590.45%

_UPCoM Index has 105 sessions losing point, 140 sesions increasing point and

2 sessions no changes in points, a total increase 17.84 points (42.02%) devoted to the end in 2013, stop at 60,3 point

_ Highest UPCoM – index 125.6 and lowest UPCoM- index 41.97

_ The total trading volume of the market reached 546.56 million shares, trading value reached 5.410 billion On average, trading volume reached 2.21 million shares / session, a trading value reached 21.9 billion ( increase 590,45% about av-erage trading volume and 972,25% about average trading valuecompared to 2013)

6.3 (a) The government bonds in 2014

* The primary market of government bonds