Investors cast greedy eye on Lao market

Domestic investors are eager to obtain information about the new Lao stock market since the Laos Securities Exchange officially began trading on January 11.

The market – which initially opened with only two listed shares, the Bank for Foreign Trade of Laos (BCEL) and EDL Electric Manufacturing Co (EDL-Gen) – has also attracted interest from foreign investors from Japan, South Korea and China, all drawn by the high profit potential offered by a newly emerging market.

But the attractive investment conditions are making the Lao market especially appealing to Vietnamese investors. The Lao exchange allows investors to open multiple accounts, buy and sell the same shares in a single session (i.e., margin trading), and it takes just two days for shares to reach investor accounts following settlement (T+2).

Vietnamese investors have been waiting for features like these to arrive on the domestic market for the past 10 year.

Last year, the media reported many stories about appeals for new products on the domestic stock exchanges, and members of the Viet Nam Association of Securities Businesses (VASB) also prepared a proposal with the support of its almost 100 members seeking official authorisation from market regulators to deploy some of these new products and unleash the trading potential of the domestic market.

Securities companies admit that, although the authourities currently do not formally allow brokerages to open multiple trading accounts for a single investor or provide them with margin trading services, the unlawful use of these tools are quite commonplace in reality.

“Official implementation of such products have been expected by investors and securities companies and could help the domestic stock market develop more dynamically,” said Tan Viet Securities Co deputy director Nguyen Viet Cuong.

Nguyen Son, head of stock market development for the State Securities Commission, said that last year, the commission submitted a draft regulation to the Ministry of Finance that would have allowed investors to sell shares on a T+2 basis instead of the present T+4.

However, to deploy this system would requires a number of accompanying products, such as solutions to problems related to settlement and payment and monitoring investor accounts to avoid short selling, Son said.

“We are developing a number of systems to support this service and hope T+2 will soon be authorised,” he said.

Other new products, like margin trading and multiple trading accounts, have been included in the draft circular on securities transactions and would soon be submitted to the ministry for likely approval this year, Son added.

HCM City Stock Exchange director Tran Dac Sinh agreed that the introduction of new services could help boost market volumes and the liquidity of shares, but he said it would take time to complete the necessary technology and legal framework.

“We hope investors will not have to wait too long,” Sinh said.

Deputy Minister of Finance Tran Xuan Ha has also said that the Vietnamese stock market would have many opportunities to grow this year as the ministry “is continuing to restructure operations and amend regulations to create conditions for market development.”

Meanwhile, the less-regulated Lao market is attracting interest – and capital – from local stock market players.

Veteran HCM City-based investor Nguyen Quang Anh says, even though he has never set foot in Laos, he has intended for some time to invest in the Lao stock market, and he rushed to get information as soon as the media announced the the opening of the new market.

Some investors have opened investment accounts in Laos through LaneXang Securities Co, a joint venture between Lao Development Bank and Viet Nam’s Sacombank Securities Co and one of two brokerages operating in Laos.

According to one securities company which has helped domestic investors to invest in Laos, a few dozen Vietnamese investors have opened trading accounts in Laos so far, and most of those have been large investors. — VNS

Tags: Lao securities exchange, Lao stock, Lao stock market