Vietnam formally launches derivatives market

The derivatives market has been officially launched in Vietnam in a move expected to fine-tune the country’s financial market and make it a major channel for providing medium and long-term funds for economic growth.

Deputy PM Vuong Dinh Hue (3rd from left) at a ceremony to launch the derivatives market
Deputy PM Vuong Dinh Hue (3rd from left) at a ceremony to launch the derivatives market

The launch on August 10 made Vietnam the fifth country in ASEAN, along with Singapore, Malaysia, Indonesia and Thailand, and the 42nd country in the world to have a derivatives market.

Vietnam’s equity and bond markets are currently equivalent to 80% of GDP, with the equity market equal to 57% of GDP and the bond market 24% of GDP.

The amount of funds mobilised through these markets make up about 23% of total social investment.

Under a plan to develop Vietnam’s capital market released in 2007, the government set a goal to establish a derivatives market by 2020.

Since then the government has ordered the Ministry of Finance and the State Securities Commission to formulate institutions to put the derivatives into operation in a way that is appropriate with Vietnam’s conditions and in line with the best international practices.

The derivatives market will help investors diversify their investment portfolios, hedge against risks and increase the attractiveness of Vietnam’s securities market.

In regional countries, the derivatives market usually opened about 30 years after the primary stock market but Vietnam has made rapid progress with the birth of the derivatives market only 17 years after the opening of the primary market.

Deputy PM Vuong Dinh Hue stated that on August 10 that the launch of the derivatives market will improve transparency of Vietnam’s securities market, increase its liquidity and market size.

He urged relevant agencies to make Vietnam’s securities market grow further in time to fulfil its role as the main channel to provide short-term and long-term funds for the economy.