Why is it risky to invest in Vietnam’s stock market?

Compared to that of developed countries in the world, Vietnam's stock market is almost in its infancy. Therefore, not only the legal system is incomplete but most investors themselves also still lack knowledge, skills and experience. This makes investing in securities in Vietnam pose a lot of potential risks.

How many stock investors are there on the market?

In fact, individual investors are dominating Vietnam’s stock market (account for 99% of the total number of investors). According to the latest statistics of the Vietnam Securities Depository Center, the number of individual investors has reached more than 1,800,000, while the number of institutional securities investment accounts is just over 8,000.

What are the major risks?

1. Risks from low liquidity: it can be seen that liquidity of Vietnam’s stock market is quite high, but it varies with each ticker.

For example, the stock liquidity of HPG (Hoa Phat Group) is usually over 1 million shares a day, while the opposite is true for that of HCT shares (Hai Phong Cement Transport Service Company). What happens if one is holding a large amount of stock and cannot sell on the market for a long time because there are no buyers?

2. Risks from information: Vietnam's stock market is believed to be lacking in transparency. There are often frauds in financial statements, which requires securities investors to be cautious and seek to distinguish between “what companies want to show them" and “what they need to see".

3. Risks from quality and regulations of Securities brokers: securities companies may set out many rules and constraints when investors open an account (such as call margin, escrow, ...). Therefore, it is necessary to consider carefully when reading the contract because they the terms and conditions in it may greatly affect your investment.

4. Risks from market fluctuations: This is considered as one of the main risks for the majority of investors. In fact, Vietnam’s stock market is really vulnerable and almost always experiences strong fluctuations from news such as war, oil prices, interest rates, or currency devaluation, which is followed by fluctuations in prices or the up and down of the market.

Source: VietnamCredit