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Possibilities abound for stock market

Released at: 09:40, 19/10/2016 BUSINESS SPOTLIGHT

Possibilities abound for stock market

Photo: VCSC

Mr. Steven Brown, Senior Manager of the Institutional Brokerage Division at Viet Capital Securities Company (VCSC), tells VET that Vietnam's stock market has strong potential and changes are coming.

by Tu Uyen

■ How do you view the transformation of Vietnam’s stock market in recent times?

Around 15 years ago Vietnam’s capital market recorded a daily transaction value of under $100,000 equivalent, involving about 20 listed companies with a combined market value under $150 million. Investors at the time were mostly Vietnamese and usually trading in short-term cycles.

Thanks to initiatives introduced by the State Securities Commission (SSC) and regulators in consultation with market participants, today’s stock market offers investors nearly 700 companies on both stock exchanges and investor numbers are increasing day by day. Market statistics highlight this. We currently have two exchanges with about $60 billion of market capitalized value and daily trading value of nearly $100 million. This is incredible progress compared to earlier years. And when one considers the existing proportion of Vietnamese citizens participating in the stock market is still barely 5 per cent, the result is tremendous growth potential for Vietnam’s capital markets in the future.

■ What do you think about the investment opportunities in Vietnam?

Vietnam is a very popular investment destination. The principal characteristics that attract foreign investors to Vietnam are currency stability, political stability, a growing capital market, State divestments in heartily sought after industries, and increasing productivity and performance of employees. Workers are advancing their skills and the country now offers manufactured goods in addition to commodity-based exports (such as rubber, coconuts, agriculture and aquaculture). High-end IT and TMT services have also been building up. Combined, these factors offer solid, long-term potential to opportune investors.

There are companies, asset managers and sovereign wealth funds coming to Vietnam because they find it a stable and safe investment destination. They see Vietnam not only as an ideal location for FDI for export-oriented activities, they increasingly see a growing domestic market place. There are foreign banks coming to Vietnam, like Shinhan and ANZ, who have established branch operations to service the burgeoning domestic market, and sovereign wealth funds that are investing in world-class Vietnamese banks, like we recently witnessed when the Government of Singapore (GIC) announced it is investing in 7.7 per cent of Vietcombank.

It is likely that we will see more foreign banks seeking regulatory approval to expand their service offerings, be it advancing on from basic representative office status or providing basic banking services to being able to offer mutual funds, comprehensive financial advice and stockbroking services. Shinhan Bank is an example of this. Others will follow, as the domestic market is becoming increasingly attractive to foreign banks as citizens are earning more and GDP per capita is trending upwards. These developments support banking and insurance sectors and enable the introduction of more sophisticated banking, fund and share investing services to their clients.

Share investing advice, pension advice, and mutual fund products advice are examples of expanded service offerings that are likely to be offered by most banks and securities houses when license capabilities enable employees to counsel clients on such services, and all of these are foreseeable in Vietnam in the coming time. As and when they get introduced, VCSC is ideally suited to offer these types of services to our clients.

At a more macro-level, you don’t get many other countries in Asia enjoying an economic climate as robust and promising as Vietnam’s. Companies offer investors dividend yields that are very hard to find in the West and developed Asia. Moreover, the country doesn’t suffer from the economic or political troubles found in the emerging BRICs nations. Vietnam’s political and currency stability is also of investor interest and differentiates it positively among international investors from other parts of ASEAN, including the Philippines, Indonesia, Thailand, Malaysia and even Australia (where the Australian dollar, for example, has whipped violently, from above parity with the US dollar to below 70 cents in the last few years). Vietnam thus offers many positives for investors and caters to multiple investor types, whether they are looking for income, capital growth, or stability or a preferred blend of these.

The government is also being conscientious in pushing forward with the restructuring of its State-owned enterprise (SOE) sector. This means foreign participation is opening up and authorities are upgrading the sector, often with strategic investors who can bring value and business expertise to a previously wholly-owned SOE. This approach is welcomed by most industry executives and employees who often, as the process develops, get an individual opportunity to become stakeholders in their place of employment.

The ongoing SCIC divestment plan, such as their recently announced 9 per cent stake sale in Vinamilk, underscores the stock market’s importance as the platform of choice for enabling investors to participate in such opportunities transparently and efficiently. Future SCIC sales will be highly sought after by domestic and international clients, given their investment quality.

■ With your experience at global companies and management experience at the three largest securities companies in Vietnam, what do you believe are investors’ concerns when investing in Vietnam?

Sophisticated foreign investors want to be treated in an international way. They want direct market access, the latest technology, the best execution policies and access to quality market research.

The majority of international and domestic customers cannot personally access the executives of listed joint stock companies. Our research, sales and investment bank personnel understand this fact and offer our clients unique, globally-experienced insights. Coupled with corporate access events and conferences, we tangibly add to a client’s overall awareness of market opportunities and identify issues to be wary of when contemplating an investment decision. In summary, our company delivers on the types of services international clients expect internationally here in Vietnam.

We support domestic and international clients, from the opening of trading accounts to engagement preferences. For example, clients requesting state-of-the-art Bloomberg EMSX FIX, OMGEO and Portware can be provided with these services at VCSC to the exact same standard as an international company operating in developed markets. Additionally, back office and ongoing customer support services are viewed with great importance by clients, and VCSC’s are ethical, transparent and lead the industry.

■ What have been the key factors that make investors return to VCSC?

Our customers come from many different countries around the world. One of the most important ways we support them is by providing them with an efficient means of meeting the heads of corporations they are investing in or have expressed an interest in. We are renowned for our annual investor conference, Vietnam Access Day (VAD). This is the largest investment event in the sector held in Vietnam and has been organized annually since 2012. VAD in 2016 attracted more than 570 investors and 35 organizations, with about 40 per cent coming from foreign countries. This is clear evidence of skill in introducing Vietnam’s capital markets to the international investment community. In addition to events, all employees work diligently, day in and day out, servicing existing clients and campaigning our capabilities to potential new client relations. Our work ethic shows in our market share. In the first six months of 2016, VCSC’s overseas brokerage market reached over 30.76 per cent on the Ho Chi Minh City Stock Exchange (HoSE), leading the market.

VCSC also has skill in introducing specific opportunities to the international investment community, such as through JSC road shows. In June we supported the GTN Foods JSC (HSX: GTN) via a road show in Singapore. GTN Foods subsequently successfully mobilized $60 million through a private placement to domestic and international investors and we are proud to have been able to support a progressive Vietnamese company like GTN Foods. During October we are supporting PV Oil, one of Vietnam’s leading SOEs (and the second-largest gas distributor) in our position as bookrunner and through introducing the company to international investors in Singapore and Hong Kong, whom, in the coming months, may express great interest in the company as it advances through its IPO process.

Our service quality and our employees’ dedication has been noted. We are proud recipients of “Best Investment Bank in Vietnam 2016” and “Best Equity Capital Markets House 2016” awards from Finance Asia magazine and the “Best Equity House in Vietnam 2007 - 2016” award from Alpha Southeast Asia magazine. Client-voted acknowledgements such as these show that our business model - committed to applying international standards when serving our customers - is recognized and appreciated.

■ With the potential of the market in the future, will securities companies strongly develop in the years to come?

Vietnam’s stock market has strong prospects. Securities companies look forward to receiving approval to offer new and supplementary services to our clients. Products include mass market products, such as those in the pension fund space and investment options for investors interested in derivatives trading.

The market is developing in the right direction and continues to grow, thanks to the government’s support. The SSC, for instance, focuses on supplying products to the market, orienting the market in an effective, transparent way and operating in a manner that benefits all stakeholders.

According to figures from the SSC, there were 79 securities firms operating ordinarily in Vietnam as at the end of September, so we have a very competitive environment with opportunities presenting to all companies. VCSC makes all efforts to ensure that our market share is strong and founded on ethical foundations as we seek new client relations and professionally serve our existing clients.

■ What are your thoughts on the economy for next year?

For the remainder of 2016 and through 2017 I believe the government will keep a close eye on inflation while engaging in initiatives that build on our extant regional competitiveness. Government policy has resulted in the country enjoying strong export competitiveness, as its trade surplus of $2.87 billion, year-to-date in August, highlights, making the country a regional leader in terms of FDI receipts. To put this into numbers, FDI inflows reached just under $10 billion as at August, up an impressive 8.9 per cent.

Manufacturing is the most popular FDI sector, from textiles to high-end technology, and this is likely to continue into the future. FDI investors increasingly view Vietnam as a base to export from and a domestic market to sell into thanks to increasing wage growth and higher discretionary spending among the population.

Provided the government keeps a close eye on credit growth (for example, as it relates to consumer finance lending activities), Vietnam’s low inflation and high GDP growth profile will continue to make it an investment destination of choice for institutional clients.

"Domestic securities companies are eagerly awaiting supplementary services they can offer, such as mass market products that link pension funds to securities investment options for Vietnamese workers, along with derivative products that are able to be used by both local and foreign investors. Enhancements such as these will accelerate both participation rates and investor depth in the country’s capital markets."

Mr. Steven Brown, VCSC

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