The new investment tool, covered warrant, will start listing and trading on the HCM Stock Exchange (HOSE) in November, according to ehe State Securities Commission (SSC).

According to Viet Nam’s securities market regulator, HOSE has completed the trading system for the new product.

Covered warrant is expected to become a new investment tool for investors to reduce the chance of risks, and to provide more options at a lower cost, as compared to common stocks and fund certificates. It allows the holder to buy or sell a specific amount of equities, currency or other financial instruments from the issuer, usually a bank or a similar financial institution, at a specific price and time.

Covered warrants can have a wide variety of underlying financial products such as company’s stocks, market indices and fund certificates that meet the requirements of the SSC.

According to HOSE, the first covered warrant products will be the large-cap stocks that are listed in the VN30 and the HNX30 indices as they meet the requirements on market capitalisation, trading liquidity and the percentage of free-float shares.

The trading of covered warrants is similar to that of stocks, as investors are allowed to use their stock trading accounts to buy and sell covered warrants.

Investors must ensure that they have enough cash and covered warrants for trading if they want to make purchase or sale transactions. In addition, margin lending is not eligible for trading of covered warrant.

Issuers of covered warrants are securities companies and they must meet some standards, such as no accumulated losses, charter capital and ownership equity of at least VND1 trillion (roughly US$44 million), as reported in the latest annual and half-year financial reports, and fully licensed securities operations.

As of mid-2017, some 10 securities firms have charter capital and ownership equity of more than VND1 trillion, including Saigon Securities Inc (SSI), VNDirect Securities (VNDS), ACB Securities (ACBS) and VPBank Securities (VPBS), as well as HCM City Securities (HSC) and Viet Capital Securities (VCSC).

Some others have charter capital of between VND800 billion and VND1 trillion, such as FPT Securities (FPTS), Vietinbank Securities (CTS), BIDV Securities (BSC) and MayBank Kim Eng Securities (MBKE). 

VNS