1 Overview about securities market

We will review about 12 years of security market from 2000-2012 first, then go to

study about the Technical analysis’s history in Vietnam.

1.1 About the law

From the day 29/06/2006, the Securities Law was passed by the National

Assembly and officially took effect in 01/01/2007, the securities market gradually

eliminates the conflict occurred with other legal documents – especially with the

Enterprise Law and Law on Investment- not only in Vietnam but in international

business. Thus, this change in policy provide a better foundation for Vietnam

Securities Market to access foreign funds, increase transparency and enhance the

supervision’s ability for the government’s institutions. The pay off time T+2 is the

most exciting anticipation by the investor in the history. After many delays, the

State Securities Commission of Vietnam finally submitted the proposed draft to the

Finance Committee in order to implement in 2012. The circular 74 got pass which

regulate that the investors can open multiple accounts, trading in the same day

carrying out depository. This will enable the competition more healthy than the

time where many entities illegally do that without the consent of State Securities

Commission of Vietnam.

However, with the positive change in how the Securities Market is function, there

are a lot of grits needed to throw away. Basically, Securities Law is still narrow in

sphere of action which only contains the fundamental content and don’t embraces

comprehensive activities in agreement with international practices. Many Acts

included are collapsed on each other, still not hold the same vision with other legal

instruments after many adjustments. Timing of the legal execution and authenticity

is late with the expected target; further, many regulations are not provided

executing instructions…

1.2 About the scale and securities market’s demand

The securities market’s size has been enlarged and took more solid step in both

long-term and middle term capital inflow function. The market has contributed to

the industrialized - modernized deed of our country. In the 2000-2005 periods,

market capitalization was at 1% GDP. Then, the scale had raised to 22,7% GDP in

2006 and continued to grow till 43% in 2007 despite of 35% GDP - Government’s

target in 2010. However, under the negative affects in international finance market

and many struggles of Vietnam economy, the securities indexes had decreased

persistently in 2011 which made the market capitalization fall off to 32% GDP.

This is top 10 companies based on their market capitalization:

Code Exchange Market cap in billion VNDPLC HNX 909DBC HNX 964PET HOSE 1,036HVG HOSE 1,800MPC HOSE 1,995POM HOSE 2,534PNJ HOSE 2,580SHB HNX 5,201PVD HOSE 8,463HPG HOSE 8,935

Sources:vietstock

Fortunately, the economics in the country and the world has showed positive signs

that give the hope for a slight recover in 2012.

The mobilization’s activities in securities market just appeared from 2006. In 2006,

there are only 44 companies that sell 203 millions shares. 2007, the activity is

immensely increased to 40.000 billions VND with 192 companies and 4

commercial banks registered with the Securities. The recession in 2008, 2010 and

2011 in security market has lead the mobilized fund through stock landing at 17,5

thousand billions VND which is about 22% comparing to 2010.

The mobilized activity in Security Exchange is intensified its part for the capital

inflow with government. The fund mobilization in 2009 is near 16,9% GDP. In

2011, the total capital raised is 73,7 thousand billions VND, equal 2,6 time in

relation with 2010.

However, the share issuing of many public companies still in unprompted format,

not really occurs based on the capital demand of the enterprises. Thus, this

symptom creates the waste in how the firms utilize the fund obtained. Further, the

issuing event just happens to be separated and not regulated in detail and depth

which make the market implicitly include lots of flaws.

1.3 About the public offering, securities listing and securities exchange

708 is the number of companies that is listed in both HOSE and HNX Exchange

counted at the end of 2011. Come back to 2000 when just 2 companies-REE and

SAM- are listed on HOSE Exchange, yet the growth’s rate of securities market is

fast and the VN-Index continuously increased to 571,04 point in 25, June 2001.

However, since then the market constantly dropped for 3 years before turn back

firmly at the end of 2003. In 2005, HNX has come into operation raise the number

of listed companies to 44 with total value of 4,94 thousand billions VND.

Beginning in 2006, Vietnam securities market tasted positive flavor and proved its

stable steps by both listed companies’ amount and the exchanging value.

1.170,67 is the highest point that VN-Index has reached in 12, March 2007. HNX-

Index has arrived at 459, 36 points. Getting through all of those records, the market

had sink without a break. As the result, in 23, February 2009, VN-Index had

touched the lowest trough at 235 points, while HNX retained 55,27 points in Jan 9

Highest point at 1.170,67

Lowest point at 235

Highest point at 459,36

Lowest point at 55,27

2012. In the beginning of 2011, VN-Index from about 500 points had stepped

backward to 370 point at the last exchange in years. Additionally, HNX-Index loss

50 point and sit in 58,44 point during 2011.

Many investors sold their stock to get out of the gloomy market. The liquidity of

securities exchanges is lessen successively, value of average exchange in 2011 just

wandered around 500-600 billions VND - about 40% comparing to 2010, and

estimated 10% to the most prospected period which is 5000 billion per daily trade.

The market price of many stock died down hard in 2011. 60% securities on both

HNX and HOSE had to accept the price under 10000 VND/share. Some is even

cheaper than the market’s vegetables, standing at 1000-2000 VND/ share which is

contrasted to a time when the price per share climbed to 200 - 300 thousand/ share.

22%

31%25%

12% 10%

number in thousand VND

< 5 5 -<10 10-<20 20-<30 >30

Figure 1: proportion of stock base on price in both HOSE and HNX at 31/12/2011.Sources : vietstock

For example, VKP stock has the cheapest price per share at the trading day

26/12/2011 at 800 VND/share and 600 VND per share in 24/12/. At the same day

CAD and SME have the same cost at 1.600 VND, VES price is 1.500 VND, ORS

31%

38%

22%

5% 4%

number in thousand VND

<5 5-<10 10-<20 20-<30 >30

is at 1.800 VND… Those who were have considerable market value like PVF,

OGC, KLS, PVX also fell behind 10000 VND

Besides, with the attempt to complete the market’s framework and keep the market

being systematic and under the government’s management, and narrow down open

market, a trading system – Upcom is set up in 24/06/2009. Until the end of 2009,

there are 34 stock is exchanged on this system. However this organization is still

not attractive to investors and public companies to participate.

Before 2006, government bond is traded both in HOSE and HNX. However, from

24/09/2009. There is a separate trading system for Government bond with 30

members. After 3 years of developing, the system increases the total number to 43

members which includes 26 securities companies and 17 commercial banks. This

exchange organization is set apart from stock exchange and gives the chance to

improve in accordance to the distinctive character of trading bond. A good new for

the bond market in 2012, a professional mechanism is shaped when 8 members of

VBMA just pledged to carry out the experimental framework market makers. At

the same time, the organization has seek the authorities’ approve in creating

praiseworthy credit rating agencies in VN. However, the market is lack of

benchmarking yield curve to determine to standard price for bonds. Moreover, the

market for corporate bond is almost out of liquidity ability when just a few

numbers of big corporate bonds take a part in trading. Further, the transparency of

this market is low, and information available is limited for investor.

Although, after taking the entire good thing into considering, securities market still

needs many adjusting. The liquidity of the market is also a considerable problem

whenever the declining sign is presented. Beside, the financial products offered is

not variable, qualified, satisfied investing demand and risk managing for the

investor like forward, future, cds, call, put in the securities market … In the end,

especially the mandates issuing procedure is released need to be fix for investor to

be well informed and prepared.

1.4 About the investors

Number of investors gets bigger over the years. 1,17 millions are the accounts that

opened in the securities market now from just 3000 account is created when the

market lay its first step in operation in 2000. However, the unexcited situation and

news in 2011 make the average trading value only reach 1.406 billions VND per

day, which is approximated ½ of 2010. Futher, our system questions how to

diversified investor more and how to restructure the investing frameworks in order

to develop steadily.

1.5 About the financial institutions and securities services

The financial institutions and its securities services has improved quickly both in

scale, skills, and the branches all over the country to serve their customers. 105 and

35 is the number of securities companies and fund management enterprises that is

running business in this early 2012. When starting, the market is consisted of 7

securities companies, even in 2004, there is still not any fund management firm.

This is top 10 companies in broker services in HNX.

sources:HNX

This is top 10 companies on HOSE with their broker services:

sources:HOSE

However, examining the circular 226 about financial safety for those financial

institution, 40 securities companies is not satisfied the CAR requirement and may

be supervised from time to time, but the list of 40 firms is not in secret for now.

1400 billions VND is the total loss that 18/27 listed securities companies has report

in 9 months early 2011. Under the effect of the dull market, many securities had to

accept to quit from the Broker’s services like Trường Sơn, SME, Đông Dương, Gia

Anh, Hà Nội. Additionally, there are enormous cases which violate the liquidity’s

requirement, where investors sued the securities companies. Thus, in lots of

articles, the market’s experts and managing executors have mentioned about the

need to restructure.

Moreover, the amount of organization that stays in business and supplies financial

services for the market enlarged too fast. Therefore, this issue increases the risk for

entire market’s system when the capital capacity, capital efficiency and skilled

knowledge are still limited, out-of-date and not matched with the mushrooming

expansion at this moment.

1.6 About the market’s organization

Although the restructure has started to fix some of the asynchronous and create for

the market more well-organized system; however, the result not really acceptable

for the fast-forward and connected requirement of the securities market now.

About the mechanism, separating the Stock Exchange and Vietnam Securities

Depository into individual entities away from State Securities Commission of

Vietnam is a wise move to increase the transparency for Government to manage

securities exchanging activities and the operating activities inside the securities

market.

Also, dividing the centralized market into 2 entities with the same trading, listing

principle about the profit and chartered capital has played a part in opening up the

flexibility and systematical ability. Thus, this gives the market more opportunities

to attract more public offering and listing companies. However, with the attempts

taken, there are disadvantage to the society. It increases the cost, time and

especially not suitably agrees with internationally customs in this connected

period. Moreover, it diminishes the competitive capacity; create difficulty to

develop the market’s system in depth which will have the synergy in utilizing the

high technology, verifying securities services in order to satisfy different demand

existing.

The initial form of OTC is brought into exist under the trading system – Upcom.

This system barely upholds the setting-up-the-market role in the decentralized way.

Beside, the number of stocks in trading comparing to the public companies’

amount is just small and unappealing to the investors. See the chart reported at

27/12/2011, we can understand the situation at Upcom when there are 93 stocks

which is about 71,53% actually don’t participate in trading:

Figure 2: Stocks’ performance on UPCoM in 27/12/2011, sources: tinnhanhchungkhoan

At this moment, Upcom is still not a dynamic organization to trade.. However, it’s

an obvious result since most of public companies is not that public and being

inefficient.

1.7 About the market’s management

The management’s activities in the securities market mainly focus in protecting

the investor’s right. Each of the managing policy has showed the determination to

intensify the publicity and the explicitness in order to step by step apply the

standard international practices in corporate governance, accounting, auditing and

the recommendations from The International Organization of Securities

Commissions (IOSCO).

There is the need to establish the supervising principles for the securities market

more focused and professionally together with international customs. Investigating

and managing activities of the State Securities Commission of Vietnam is mainly

considered those: supervising the intermediates’ activities, supervising issuing

institutions, listing institutions, supervising the Stock Exchange, Vietnam Security

Depository, while supervising trading activities in the securities market so that will

quickly notice the illegal acts and carry out the coercive function.

During 2011, along with many penalized cases about violating the information

publishing procedures such as delayed financial reports, insider trading – total

penalty is 4,6 billions VND. 2011 is also the first year that infringing corporate

administration is charged with the personal obligation.

Circular 226 about supervising the financial soundness of securities companies and

fund management was passed and has effective from 1/4/2011. This regulates the

healthy of corporate operation through Capital Adequacy Ratio – CAR. The

securities companies is considered as safe and sound if Capital Adequacy Ratio is

not smaller than 1.8. Those who break this principle will be receive tighter

supervision and may be taken off the certificate to do business.

Although, many achievements can be counted, the managing activities still include

weakness like law issuing process, rigid policies. Further it’s still passive and out

of date with other countries and the market developing requirement.

2 Overview about technical analysis

Technical analysis appeared on the securities market quite late comparing to other

developing countries, but easily take the interest of the investors. From 2008-

20012, the number of people uses technical tools like chart, indicators... to analyze

and predict how VN-Index or HNX-Index will perform is increased considerably,

especially young investors. The present of technical analysis yielded many benefit

to Vietnam securities market. Whatever it brought back, there are still flaw to chew

over.

At the first look, investor may think technical analysis is difficult than fundamental

analysis because it requires user to be intellective, inborn potential and passionate.

Nevertheless, securities market’s true self is included enormous rumors, faking

price, and much implicit risk that can’t be see and predict by the numbers or

models. So the efficiency of technical analysis is still a big question to us.

Technical analysis made its initial appearance in VN securities market in 2003

through Forex investors. However, in the good phrase of market development from

2006-2007, it finally is noticed. In 19 October 2007, VN-Index closed at 1.097,07

points. In a market analysis which is showed in the media in 22 October 2007, the

Hanoi-Boston Group surmised that VN-Index is created a bullish flag. And if the

pattern is confirmed, VN-Index will reach 1.250 in November. However, after that

VN-Index came into a huge pullback and just stopped in june 2008 when it score

360 points. With this mistake, Hanoi-Boston Group disappeared on the market. At

that time, there were a lot of more daring forecasting which said that VN-Index can

go up to 1500 points, even 2000 points, but Hanoi-Boston receive the most critic

because they used technical analysis, a new method. Till now many technical

analyst complain they get unfair treating comparing to fundamental analyst. We

can say the border between intellectual, concise and deceitful, fictitious in

technical analysis is very thin

After Hanoi-Boston group, a Singapore analyst continues to use technical to

predict the fate of Vn-Index and got good reputation from that. At the end of july

2008, despite VN-Index already touch the support level at 360, but he determined

that VN-Index still on the downward trend and can be down to 300 point. Lot of

investors didn’t agree to this anticipate, but the reality was happened exactly in the

end of 2008. However after 2008, his prognostications were not right anymore, so

he was also out of VN securities market. So from then, instead of listen to technical

analysts many investors decide to learn and estimate the trend by themselves.

Since there is demand, there is supply, many securities companies started using

technical analysis for customer’s services. First, some of the securities companies

supplements technical tools into their website, and instructs how to use them.

Moreover, daily, weekly report on the market beside utilize fundamental analysis,

these companies also add technical analysis as a guide for their investors.

However, just some of the securities companies work on the analyzing with

responsibility, the others do them for self-praising, professional claiming, not

really focusing on the benefit of their customers.

Technical analysis of Âu Việt securities companies in 21-7-2010.

Unclear predict

Many investors take the initiative to get their profit and technical analysis is one of

the most effective tools to catch securities waves. However, the quality of technical

analysis doesn’t develop to match with the demand of investors, because in VN

nowadays, official schools and classes is limited and the tuition is not in small

number. Thus many people approach to technical analysis by study by themselves.

If lucky, someone potential they can get an experienced, passionate master will

soon become a high skilled analyst. But if they don’t have the talent, no one

instruct them, the chance to improve the skill is slim. At foreign securities

companies, in order to be an employee, they have to earn CMT certificate

(Chartered Market Technician). At VN securities market, the number of people

obtaining CMT barely exists.