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A brief history of trading band adjustments   0000-00-00 - VNS

The trading band for both the HCM City Stock Exchange (HOSE) and the Ha Noi Securities Trading Centre (HASTC) was widened once again.

The State Securities Commission’s Thursday decision sets HOSE’s new trading band at 5 per cent and HASTC’s at 7.

The trading band represents the amount that listed shares can rise or fall within a single trading day.

The expansion is the ninth trading band adjustment since the stock market began sessions in 2000. Since, then band adjustments have served as a barometer for market conditions within the country.

July 28, 2000: The first time the trading band was altered, the State Securities Commission tightened it from the planned 5 per cent to 2 per cent. The new band applied in the very first trading session of the stock market.

The VN-Index started at 100 points, and after a year with an adjusted 2 per cent band, it rose to 571 points.

June 13, 2001: The commission decided to widen the band from 2 to 7 per cent, plus or minus. The stock market saw rapid growth during 6 consecutive sessions. Subsequently, the VN-Index dropped to a record low of 203 points on October 12, 2001.

October 15, 2001: As a result of broad panic on the stock market, the trading band was changed a third time. Securities regulators decided to make a dramatic move by tightening control over shares, narrowing the band to 2 per cent, plus or minus, from the previous 7 per cent.

The commission also decided to reduce the tranche of shares from 100 to 10 and to increase the trading session number to six days a week, instead of three.

As a result, the VN-Index advanced consistently for 19 sessions, but then began dropping back.

August 1, 2002: The trading band was loosened from 2 to 3 per cent and the VN-Index still declined.

December 23, 2002: The commission resumed a 5 per cent trading band to encourage more exchanges. The stock market experienced strong growth during the 2005-2007 period.

March 27, 2008: Impacted by the fluctuation of both local and global economies, the nation’s stock market began to suffer. Investors began selling shares en masse, incurring huge losses. Securities regulators once again intervened in the market by reducing the band to 1 per cent from 5 per cent on HOSE, and 2 per cent from 10 per cent on HASTC.

As a result, the VN-Index rose for several sessions. The action prevented share dumping, but liquidity was lost.

April 7, 2008: Due to lack of market liquidity, an imbalance arose between share supply and demand, so the commission cautiously loosened the band by one percentage point for both bourses.

The VN-Index continued its up-trend and then went into a consistent falling pattern, though liquidity improved somewhat.

June 16, 2008: The band was loosened by one percentage point yet again, as Government efforts toward stabilising the economy began showing the first signs of success.

Accordingly, shares listed on HOSE were traded at around 3 per cent of a single day’s preference price, plus or minus. On HASTC, shares fluctuated within 4 per cent.

The VN-Index fell in 3 consecutive sessions to its lowest level yet, 368 points, on June 20. After that it rebounded and continued gradual gains, with the occasional downturn as investors unloaded shares to turn a profit.

August 18, 2008: Shares listed on HOSE will be traded at around 5 per cent instead of 3, and shares on HASTC at 7 instead of 4.

The change has been viewed as a bold and potentially reckless step by securities regulators. However, the regulators have based the change on the increasing stability of local and overseas economies and greater enthusiasm from investors in securities trading.

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