Foreign firms fear to tread in Việt Nam securities market

Monday, Feb 05, 2018 09:11

Viet Nam increases the number of fully foreign-invested companies in the country to five, the others being Mirae Asset Securities, Kis Viet Nam Securities Corporation, Maybank Kim Eng Securities Joint Stock Company, and Shinhan Securities Viet Nam, four of them South Korean owned. — Photo

In January Viet Nam KB Securities Company opened an office in Ha Noi after South Korea’s KB Securities had acquired Viet Nam’s Maritime Securities for about 37.8 billion won (US$33.16 million) late last year.

KB’s acquisition of a local securities company was aimed at expanding its presence in Southeast Asia, including Viet Nam and Indonesia.

Viet Nam increases the number of fully foreign-invested companies in the country to five, the others being Mirae Asset Securities, Kis Viet Nam Securities Corporation, Maybank Kim Eng Securities Joint Stock Company, and Shinhan Securities Viet Nam, four of them South Korean owned.

The entry of foreign securities companies has sharply raised the quality of services and technology in the market.

KIS Viet Nam, for instance, assigns top priority to margin activities, which refers to lending money to customers to buy stocks, and has become one of the top 10 securities companies.

Mirea Asset has a charter capital of VND2 trillion (US$8.1 million), the third highest in the securities market.

But for all their success, the number of foreign brokerages has been increasing at a snail’s pace.

In 2015 the Government issued Decree No. 60/2015/ND-CP to guide a number of articles in the Law on Securities, especially foreign participation in the stock market.

One of its most welcome provisions was the removal of the 49 per cent cap on foreign ownership of companies that have not less than 100 share holders or VND10 billion in charter capital.

In general, from September 2015 foreign ownership of public companies in most sectors does not have any restrictions.

This has given a big boost to foreign direct investment and has made the Vietnamese stock market a popular destination.

According to the State Securities Commission, by December 2017 Viet Nam’s stock market and fund certificate value reached VND3.36 quadrillion (US$148.17 billion) in 2017, equivalent to 74.6 percent of the country’s gross domestic product.

The number of securities accounts also climbed up to nearly 1.9 million, including 16,000 owned by foreigners, an year on year increase of 11 per cent. Market capitalisation of listed companies including those in UPCoM was about US$112 million.

There were 731 companies and mutual funds listed on the two stock markets and 679 others on UPCoM with a combined value of VND959 trillion, up 30 per cent from a year earlier.

However, two years after the decree took effect, there are only five fully foreign securities companies out of the existing 74.

Analysts say their performance has not matched expectations, and pointed to certain possible causes.

For instance, they are allowed to open only one office in the country, while local brokerages have no such restrictions.

Besides, 100 per cent foreign-owned securities companies find it more difficult than local brokerages in implementing borrowing and lending capital for securities investment activities due to lack of knowledge about the local market.

But the analysts say the participation of the foreign securities companies is very important for the country’s securities market since it not only creates competition, which is key to improving the quality of service, but also acts as a bridge linking the Vietnamese and global markets.

Bank shares expected to shine

On January 5 HDBank listed around 981 million shares on the HCM City Stock Exchange (HoSE) at a price of VND33,000 (US$1.46).

HCM City Development Bank, as it is formally known, has become one of the 20 biggest companies on the southern bourse with a market capitalisation of $1.43 billion.

Its shares have soared 40 per cent from the starting price of VND33,000.

Earlier the bank had raised more than $300 million by selling a 21.5 per cent stake to foreign investors.

Foreigners can buy another 8.5 per cent to reach the permitted cap of 30 per cent whereas they have already reached the limit in many other listed banks.

HDBank was the first lender to go public in 2018, and the eighth so far to list on HoSE.

Last August, after three years without any banking stocks listing on the country’s main bourse, the Vietnam Prosperity Joint Stock Commercial Bank, better known as VPBank, listed more than 1.3 billion shares on HOSE.

In the first minutes of the at-the-opening-order (ATO) session on August 17, VPBank matched a total of 46 million shares with a reference price of VND39,000.

This price helped VPBank earn a record of nearly VND1.8 trillion, of which, foreigners spent VND1.45 trillion on purchasing more than 37 million out of 46 million shares during the ATO session.

Subsequently, the shares fluctuated from VND33,000 to VND36,000 per share.

Significantly, VPBank’s share prices have also increased by 40 per cent since listing.

Besides HDBank and VPBank, the shares of many other lenders, especially those with impressive results, good bad debt settlement and feasible development strategies, are also on an upward trend.

The consumer lending segment is the most attractive to investors, who consider it the goose that lays the “golden eggs”, according to analysts.

Thus, VPBank’s FE Credit and HDBank’s HD Saigon now interest not only foreign investors but also local ones.

Analysts said the strong growth in profits in the banking sector in 2017 has made bank shares very attractive this year.

In 2017 many lenders achieved around VND10 trillion in profits. Significantly, many small banks saw profits breach the VND1 trillion mark.

SBS Securities Company has said bank shares should be one of the first options for investors this year.

Many banks have plans to list this year to increase their chartered capital, making more financial sector shares available.

The dynamic credit growth and rapid decrease in bad debt ratio have also made bank shares attractive now.

A poll by Vietnam Sample Report Joint Stock Company found 45 per cent of respondents saying shares of businesses in the financial and banking sector would see impressive growth and be the most profitable on the securities market.

It looks like bank shares are set for a rollicking run in the market this year. — VNS

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