Derivatives interest many investors

Derivatives products will be available for trading in the Viet Nam’s securities market in less than a month, and institutional investors seem highly interested in the new products, reported on Thursday.

The first two derivatives products that will become tradable in May are the index future contract and future bond contract.

Derivatives products have become popular in other advanced markets and the products are expected to help Viet Nam draw more foreign investment.

But in the domestic market, these are new and highly risky products. Therefore, individual investors will need time to get used to them, and institutional investors are expected to create the fundamental foundation for the development of this market in Viet Nam.

By using future contracts, investment funds and institutional investors can make profits by forecasting the rise and decline of key indices, such as the VN30 and the HNX30.

Those products will reduce the risks in the price of stocks included in their long-term investment portfolios.

Vuong Tuan Duong, executive director at VinaCapital, said that the derivatives products would help attract more foreign investors to Viet Nam’s securities market, increase the total market trading liquidity and raise the valuation of Viet Nam’s securities market.

Using derivatives products could help investment funds predict the future movement of securities and lock in profits expected from their invested assets, he said. That would help those funds avoid losing profits from their investments and encourage them to make more investment in Viet Nam’s securities market, Duong said.

According to the institutional research and advisory division at Saigon Securities Inc (SSI), foreign investors in other financial centres like Hong Kong and Singapore are highly interested in Viet Nam’s derivatives market as they are now able to invest in one index that represents the whole securities market instead of going through the two foreign exchange-traded funds (ETFs).

"If institutional investors presume the market is rising, they can invest in the market as a whole instead of researching and studying each stock," said Nguyen Thi Thuy Giang, deputy head of the division. For example, they could purchase the future contracts for the VN30 index, which represents Viet Nam’s stock market, she said.


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