OTC market in disorder

“Chaotic” is the word analysts use to describe the OTC market at this moment: few transactions are successful, while there is no trustworthy price reference.

Analysts have said that the OTC market is in the gloomiest period in its history. There are no benchmarks for stock prices. Investors are facing risks in liquidity. They are looking forward to the day when OTC transactions are put under the supervision of the State Securities Commission (SSC).

There exist big gaps in the referred prices of stocks shown on securities websites. A website said that EIB’s (Eximbank) price was now 7.05 times higher than the face value, while another said 6.9. Meanwhile, on a website specialising in OTC transactions, an investor offers EIB at 6.7 but still cannot find buyers.

PNB is offering Vietstock at 3.75, while on another website, an investor remains unsuccessful with his sale of PNB at 3.6.

Le Hiep, an investor on HSC trading floor, who also makes OTC transactions, said that he himself found it difficult to buy or sell now on the OTC market. “When the market was hot, investors always made deals very quickly, but now they find it hard to reach agreements on final prices,” Mr Hiep said.

He added that it sometimes takes several days to make a deal. Meanwhile, on the official bourse, the orders of investors can be implemented in just several tens of seconds or within a trading session at maximum, because investors can make quick decisions after considering the reference prices and the trading band.

Mr Hiep said that on the official bourse, when a listing company issued additional shares, the price of the company’s shares would be adjusted immediately in accordance with a set formula. Meanwhile, no one takes this work of calculating and adjusting the reference price on the OTC market. The data on OTC websites sometimes is not updated even when companies issue additional shares; therefore, investors do not know what prices would be suitable.

“The OTC market needs a conductor,” said Nguyen Dung, an investor, who has an account at ACBS.

As there is no benchmark for stock prices, many institutions have been trying to set prices for the market. They, under the cloak of investors, offer to buy shares at different price levels in order to explore the situation. The existence of such institutions has been making the market more chaotic.

In general, investors make transactions with the assistance of ‘brokers’. Investors inform the brokers the prices they want, and brokers will find the investors suitable for the deals.

Analysts say that OTC transactions are in a vicious circle. Investors, afraid of the risks in price and liquidity, are trying not to make transactions these days, making less and less transactions successful. Meanwhile, as there are few transactions, the risks investors have to face have become more serious.

Investors on the OTC market all expect SSC to set up a transaction management system, which will help make the market become healthier.

Tran Thanh Nam, a staff from the MHB Securities Company’s Brokerage Company, said that once the system became operational, transactions on the OTC market would be more bustling and orderly.

Source: VNE