VietNamNet Bridge - Two Vietnamese securities companies have announced they will remove the foreign ownership cap on shares. Who will be next?

With the government’s Decree No 60 and the State Securities Commission’s (SSC) Circular 123, foreign investors now can invest in Vietnamese securities companies with no restriction on ownership ratio and no further procedures required.

SSI was the first securities company to open its doors wide to foreign investors in September. 

HSC said that it would offer up to 100 percent of foreign ownership once the legal framework was set up.

A report shows that of the 81 securities companies which are under normal operation, 40 have foreign investors. 

The foreign investors include Morgan Stanley and Citibank, Nikko Cordial, SMB Securities and Woori, Korea Investment & Securities (KIS) and Mirae Asset Securities, CIMB and Kenanga.

However, only 10 companies have foreign ownership ratios hitting the maximum level of 49 percent in accordance with the old regulation. 

Meanwhile, Maybank Kim Eng is the only 100 percent foreign owned securities company operating in Vietnam.

This, as analysts commented, showed that foreign investors remained hesitant to pour their capital into securities companies. 

Only top-tier securities companies, such as SSI, HSC and VNDirect (VNDS), can attract foreign investors. The foreign ownership ratios at the companies are at the highest possible level. 

There are many reasons which prompt good securities companies to attract foreign capital. 

First, in order to provide new services, securities companies need to have large operating scale. 

According to SSC, only 19 securities companies have charter capital of VND500 billion and higher, while only several of them have VND1 trillion and more.

Second, Vietnamese securities companies need foreign investors’ support in terms of corporate governance and development strategies.

When the stock market develops at a higher level, securities companies would not focus on competing for larger market share in brokerage services, but would compete in terms of technologies and customers care services. Therefore, they need foreigners’ capital and experience.

However, Vincent Nguyen, CEO of HVS Vietnam, said that the ceiling would not be the only factor that would attract foreign investors. Having an abundance of goods on a large market scale would be necessary.

Meanwhile, the 15-year-old Vietnamese stock market remains modest with capitalization value of $55 billion, which is nearly equal to 45 percent of GDP. 

The market’s daily trading value is $88 million, which is lower than the Philippines ($426million) and Indonesia ($528 million).

NCDT