Stock market breakthrough as international brokers target Vietnam

Vietnam's stock market is now an emerging destination for international brokers thanks to its large trading volume, increasing participation of foreign investors, and flexibilty on commissions, according to a recent report of Bloomberg.

Mike Lynch, former managing director at CIMB Group Holdings Bhd. in New York, moved to Ho Chi Minh City over a year ago to head institutional equity sales at Saigon Securities Inc., the biggest local brokerage.

Joining Lynch half a year later was Lawrence Heavey, who has a decade of Asian equities experience at CLSA Ltd, the Bloomberg report said.

In January this year, Ho Chi Minh City Securities Corp., one of Vietnam’s big three brokerages, Stephen McKeever, who used to lead Asia ex-Japan’s equity sales at Mizuho Securities Co. in Hong Kong.

Bloomberg said commission fees at other markets “are being eroded” by regulations by the Markets in Financial Instruments Directive, or MiFID, which standardizes regulations for investment services across all member states of the European Economic Area.

Another important reason that makes Vietnam’s stock market attractive to brokers is its big trading volume, the report said.

The annual turnover ratio in Vietnam was 32.6 percent in 2017 compared to 11.6 percent in the Philippines and 17.8 percent in Indonesia, according to the World Bank.

At its peak in January, average daily trading volume was more $300 million, boosted by an economic growth of 6.8 percent in 2017, the highest in a decade.

Increasing participation of foreign investors in the country’s stock market is also set to present more job opportunities to foreign brokers, the report said.

Singapore wealth fund GIC came in as a pre-IPO investor in April and took a 5.74 percent stake in Vinhomes, the residential property development unit of Vingroup JSC, Vietnam’s biggest real estate conglomerate, for about $853 million. It bought shares from Vingroup and other shareholders, sources said.

An initial equity offering of Vinhomes JSC raised about $1.35 billion in Vietnam’s biggest ever issue, sources told Reuters in May.

Vingroup JSC had been looking to raise $2 billion from the listing of Vinhomes.

Also in April, GIC, Fidelity Management and Research and local fund Dragon Capital snapped up 76 percent of the IPO launched by Vietnam Technological and Commercial Joint Stock Bank (Techcombank), which raised about $920 million.

Although Vietnam’s stock market recently lost the gains it had made so far this year over last year, closing at 948.5 points on Wednesday, it has outperformed the rest of Asia in the first few months of this year.

The country’s benchmark VN-Index closed at a 10-year high of 984.24 on the last working day of 2017, earning Vietnam the nickname Asia’s “frontier market” with a 47 percent gain.

It closed at 1,120 points on February 28, up a staggering 14 percent from the beginning of the year, which was the biggest gain worldwide.

On the closing session of March, the VN-Index rose 19.33 percent against the start of the year to 1,174 points and maintained its leading position among the fastest growing markets in the world.