If serious turbulence is caused by large-scale sell-offs and considered a threat to the security of the equity market, the Ministry of Finance will have to switch the market off.

An investor (L) consults a staff in a securities company.
(Source: tinnhanhchungkhoan.vn)

In a written response to the Vietnam Financial Advisory Association, the Ministry of Finance said amid the prolonged COVID-19 pandemic and rising tensions between the world’s largest economies, global stock markets are becoming more vulnerable and sensitive to bad news.

“Using technical solutions to intervene in the stock market did not help prevent the market's decline and also affects the confidence of investors, therefore under normal circumstances, the Government should not intervene in stock trading to ensure the market's smooth operation and transparency,” the ministry said.

However, in emergencies, if the market falls too much in a trading day due to unexpected negative news impacting overall sentiment, the ministry would have to halt stock trading to calm the market down.

According to the finance ministry, market turbulence caused by large-scale sell-offs is considered a threat to the security of the equity market. The reasons for such a sell-off may come from bad news from international markets, the dissolution or insolvency of a company, or changes of regulations.

Aside from halting the market, the finance ministry would also ask stock exchanges to adjust the trading time and change the daily trading limit of stock prices to prevent the market from plunging.

Stock price adjustments have been applied in volatile periods of the stock market, most recently in the financial crisis in 2008. This acted as an “emergency” solution, helping stop the downtrend of the market. But its effectiveness did not prolong so it was just a short-term solution, the ministry said.

The ministry also said halting trading is an extreme solution, only applied in very special cases. For example, the ministry had to shut down the Ho Chi Minh Stock Exchange (HoSE) on January 23-24, 2018 due to a technical problem with its system.

Extend fee cut regulation

The finance ministry will also extend the validity for the fee exemption regulation until June next year, scheduled to be applied from March to August 31 this year.

Under Circular 14/2020/TT-BTC issued on March 18, the ministry announced it would cut the fees of nine securities services and exempt fees for six others from March 19 as part of efforts to support the stock market amid the negative impact of the COVID-19 pandemic.  

The cut and exemption will now be extended till June 30 next year.