Vietnam yet to need automatic circuit breaker for stock market

In the future, the new KRX information technology system will include the automatic circuit breaker mechanism, but it may only be implemented when the trading band is widened.

Vietnam’s benchmark VN-Index dropped 78 points on Tuesday afternoon.

Up to 265 stocks hit the floor prices, among the 506 stocks falling, while only 11 stocks increased.

Investor confidence has weakened, and the buying power at lower price levels was not as strong as in the two latest sessions.

This strong fall in Vietnam’s stock market was not a surprise to investors. On the previous day, many regional markets experienced sharp declines.

Several major exchanges simultaneously triggered their circuit breakers during the first session of the week as the selling wave spread across Asia following new tariff policies from U.S. President Donald Trump.

In Taiwan, operators also pulled a circuit breaker after experiencing a steep decline of 9.7 percent.

In Japan, the circuit breaker system paused trading for 10 minutes when the widely traded Nikkei 225 futures index fell more than eight percent. Trading resumed after that.

Circuit breakers are designed to temporarily stop trading in case of extreme volatility. This mechanism is applied in many markets around the world although it is rarely used.

On online forums, many investors have been speculating about the potential use of a circuit breaker in Vietnam and when it might be necessary.

A director of analysis at a securities company said that Vietnam’s Securities Law clearly stipulates that the State Securities Commission of Vietnam has the authority to temporarily stop or suspend trading activities on the Vietnam Exchange and its subsidiaries under certain circumstances.

These include wars, natural disasters, major economic disruptions, system failures, or other unforeseen events that affect the normal trading activities of the stock market.

The mechanism may also be applied if there are abnormal fluctuations in the stock market or in situations where it is necessary to protect the legitimate rights and interests of investors and ensure market stability, safety, and integrity.

"Other markets, including both developed and emerging markets, all have circuit breakers. The implementation of this mechanism in Vietnam will be in line with international practice," said the analysis director.

“However, the current system does not yet integrate this mechanism. Once the KRX system is applied, we will have the technical foundation to activate it."

He further noted that implementing a circuit breaker is not as simple as investors may think. It requires clear mechanisms and technical solutions in order not to trigger unnecessary reactions from investors.

It is not purely based on intuition but follows a very specific procedure, as this is indeed a serious issue for the market, he added.

Nguyen Thanh Ha, chairman of SBLAW Law Firm, emphasized that even if Vietnam implements a circuit breaker mechanism, it should not be used under the current circumstances.

The market has experienced a decline for three consecutive sessions, but the Vietnamese government is actively negotiating with the U.S. on reciprocal tariffs. Trading suspension should not be considered, even if the mechanism is available, Ha said.

Temporarily halting trading, even for a short time, could have other unintended consequences, according to Ha.

Regulatory bodies should closely monitor the situation and reassure investors, while investors should remain calm, avoid panic, and stay updated on the tariff negotiations and global market fluctuations, Ha advised.