The Ministry of Finance of Vietnam has proposed a law under which so-called short trades can be entered into on the local exchange for the first time. The Cabinet is promising to grow trades volumes on the stock exchange from that.
In Vietnam, the option was first proposed in 2014, however efforts to allow short trading in stocks went blank. And so Vietnam is anxious to legalize this type of trade after six years. The proposal was adopted with international financial institutions.
Vietnam, as one of the world’s fastest-growing economies, is trying to find a way to enhance the image of its financial markets with foreign investors. The Treasury said that even before a final decision was made, it expected reactions from shareholders of individual firms who would be concerned by the possibility of trading short. However, it seems that nothing should stand in the way of this type of trading.
The so-called short trades consist of having an investor borrow a share of a company that he sells immediately. Subsequently, he speculates that the price of a given stock will continue to fall so that he can buy it at a lower price. The share returns, but the price difference between the sale and the purchase of the security is made up of the investor’s earnings.