How big is the cash flow into HoSE?

4 min read

The chain of blocking days started when the cash flow increased more than 10 times and HoSE, a system that used to receive less than 170,000 orders per session on average, had to load 900,000 orders.

Liquidity of stock markets in ASEAN region.

Liquidity increased by 1,167%

Recently, the Ministry of Finance has decided to inspect the Ho Chi Minh City Stock Exchange (HoSE) about the prolonged blocking of orders.

The system first appeared in this situation at the end of December 2020. But looking back at the beginning of 2020 – when the epidemic had not yet broken out, the matching value on HoSE was only 96 million USD (equivalent to 2,250 billion VND). This number is only ranked above the Philippines and 16 times less than the leading market in Southeast Asia, Thailand.

The landscape changed rapidly after a year of “Covid”. While the liquidity in other markets showed signs of going down, Vietnam continued to go up. By the time the system malfunctioned at the end of the year, the matching value per session on HoSE increased by 483% and surpassed the Philippines and Malaysia. The gap in liquidity compared to the Thai market also narrowed to 7 times.

The order-matching value per session from the beginning of June until now has always been over 1 billion USD (except for the session on June 1 which reached 905 million USD because HoSE stopped trading in the afternoon to avoid system problems). Thus, in less than 18 months, HoSE’s liquidity increased by 1,167% and on average each session was larger than the total trading value of Singapore, Malaysia and the Philippines combined.

Liquidity gradually increased month by month, according to analysis groups, coming from the cash flow of domestic investors moving from other investment channels to securities.

The hot growth of Vietnamese stocks is even more obvious when placed in the market capitalization scale. Liquidity skyrocketed, but Vietnam’s capitalization fluctuated disproportionately when it only increased by 125% compared to the beginning of 2020 and improved by one level, from 6th to 5th in the region. By the end of the trading session on June 9, the market capitalization reached 217 billion USD (equivalent to about 5 million billion dong) and less than half of Indonesia or Thailand.

Meanwhile, wanting to significantly impact the price of bluechip stocks such as VIC (Vingroup), TCB (Techcombank) or HPG (Hoa Phat) requires money that can reach trillions of dong and not many people have the potential to do it.

Struggling with plans

HoSE’s system and technology, handed over by a team of experts from the Stock Exchange of Thailand 20 years ago, cannot be adjusted for expansion today.

According to VnExpress’s research, the system from the beginning of 2020 and earlier usually received less than 170,000 orders per session on average. However, by the end of 2020, this number exceeded 600,000 orders and began to issue warning signals. Currently, the number of orders processed per session is 867,000 orders – close to the ceiling capacity of 900,000 orders per session.

The maximum number of orders is hard-coded according to the old technology and divided 80% of orders for market members, 20% of orders for backup. Initially, the system allocates about 3,000 orders to each company, then continues to divide the order proportions into the system for the last 30 days.

During the “hot” market period, HoSE changed the way to allocate orders to securities companies, so there were two periods of improved liquidity from 12,000-13,000 billion dong per session to 16,000-17,000 billion dong and then to about 21,000 billion VND.

However, the demand for transactions skyrocketed, making this option not fully resolved. The system is still congested in a chain since investors place orders, orders are transferred to the system of securities companies, then securities companies move to HoSE’s system to match orders and go in the opposite direction to return results.

The general director of a foreign-owned securities company said that the allocation order to this company was used a lot in the morning, especially in the first minutes and in the transition. This leads to the situation that in the afternoon, investors may take 5-10 minutes to successfully send orders, instead of in a split second as before. When the system received and processed the order, the price fluctuated very differently from when the decision was made to buy or sell.

Many comments raised questions about the vision for market development when the State Securities Commission or HoSE did not calculate a backup for the system, making a “road” available before welcoming the flow of traffic.

Responding to VnExpress, leaders of both the State Securities Commission and the HoSE confirmed that “contingencies have been calculated” but “did not be able to react in time”. Moreover, they believe that, from a management perspective, in order to ensure investment efficiency, it is common practice to limit the level of provision reasonably to avoid waste.

“No one uses a 200-seat plane to regularly carry 20 passengers or makes a 10-lane road just for frequent use of two lanes because it’s too wasteful,” a HoSE representative explained.

In the past half year, a series of ideas have been raised, raising the trading lot from 10 to 100, then to 1,000 or creating a “soft mechanism” for securities companies to stop canceling orders. The economic burden of the system is not yet relieved.

Meanwhile, FPT’s system built with a processing capacity of 3-5 million orders per session is expected to launch in July, becoming a temporary hope of investors.

The CEO of a securities company said that, in the context of very strong cash flow, how to make the system run smoothly is a top priority. “Investors can’t get all their wishes come true, but that’s still better than losing if something goes wrong, forcing a long-term trading stop,” he said.

Source: – Translated by