Some misconceptions about trading Vietnamese stocks

                                                                                     

There are few markets as compelling as the Vietnamese stock market.

With a surging middle class, highly literate, culturally open and entrepreneurial at heart, there is no market which captures my attention the way Vietnam does. Of all the emerging markets on the planet, I choose to stake my bullish bets on Vietnam for the foreseeable future.

There is, however, lots of misinformation about the Vietnamese stock market floating around. I want to clear up some of them here.  

Misconception #1

You have to have a background check to open a brokerage account.

While legally this is still on the books, the slowdown in brokerage business has placed the burden on the brokers rather than the client. If you want to trade the Vietnamese stock market, all you need now is equity to deposit into a brokerage account.

Misconception #2

There is a delay period for buying and selling stocks of 3 business days. This is partly true and partly false. Yes, you must wait 3 business days to exit a position you have already entered. But no, you do not have to wait 3 days to enter the stock as some other forums have stated.

There is talk of doing as much as possible to increase liquidity in the markets here but there is a general fear on the regulators side that it will turn the market into a vastly uncontrollable casino which they feel is generally harmful to long-term investors. While I do not share this sentiment, it is worth noting that the daily swings in the Vietnamese market are fairly orderly and this creates tremendous opportunity for those who are interested in swing trading the Vietnamese stock market.

Misconception #3

Stocks do not trade "real-time" as they do in other more mature markets.

Again, this used to be the case where there was a high middle and low point and a fixing price was determined at regular intervals throughout the trading session. Nowadays you can observe prices trading in real time from 9am (UTC +7) until 11:30 and then from 1pm until 2:45 pm Monday through Friday.

Considering these limited trade times, it is still ideal to trade based on Daily price charts. The speed at which the market trades is akin to Wall Street of the 1970s. This might seem a detriment to liquidity but safe to say anyone reading these pages is not trading in the millions of shares per transaction and thus it just makes trading decisions all the more low risk. The market maker system which Wall Street has now rejected is not a problem in Vietnam as a limit order is anonymous and FIFO is in play. In a culture of nepotism and corruption, the Vietnamese stock market is as egalitarian an opportunity as there ever has been. What a great time to be trading Vietnamese stocks.

Misconception #4

The market is a sham, prices are determined by large players who just give the impression of a fair market. While this is true in some smaller OTC stocks, there are foreign institutional buyers who are easily singled out--according to local mandates--and thus create opportunities for small investors to actually see in "real- time" what they are up to. This kind of transparency is advantageous to the little guy, it is nothing to fear.

While there are many real risks investing in Vietnam as a private investor, the allocation of a small portion of your long term capital should be heading towards Vietnam already.