Workers outside the Hanoi Stock Exchange in downtown Hanoi. The State Securities Commission is trying to restructure the stock brokerage industry. Photo: AFP
In an effort to comply with Vietnam's trade commitments, the State Securities Commission will begin allowing foreign investors to wholly-own brokerage firms.
A decree set to take effect on September 15 will allow foreign investors to buy out local brokerage firms or establish new ones, Dau Tu Chung Khoan (Securities Investment) newspaper reported Monday. For existing listed brokerages, foreign ownership will be capped at 49 percent.
The move comes rather late. As a member of the World Trade Organization, Vietnam was required to start allowing full foreign ownership of securities firms at the beginning of this year.
An official from the State Securities Commission told Dau Tu Chung Khoan that, after September 15, the agency will release further guidelines instructing foreign investors on how to set up their own firms.
Nguyen Van Manh, deputy general director of Kim Eng Vietnam Securities, said the new policy seems feasible and will give investors the option of either buying a minority stake of up to 49 percent or completely owning a company.
Manh said investors tend to favor full ownership because even a controlling stake of 75 percent does not give them complete authority. There are certain corporate cultural differences that foreign investors would want to avoid, he said.
Malaysia's top lender Malayan Banking Bhd, also known as Maybank, is looking to acquire Kim Eng Vietnam but the bank is waiting for new guidelines from the State Securities Commission to proceed with the plan, Manh said.
An unnamed director of a listed brokerage firm told Dau Tu Chung Khoan that he supported the new regulation but added that even allowing full foreign ownership would not attract investors to the market.
Vietnam's stock market is still small and suffers weak liquidity and constant fluctuations, he said. The brokerage market is also already crowded and, so far, securities firms backed by foreign investors have not fared very well.
Ho Chi Minh City Securities led the market in the second quarter with an 11.47 percent share, followed by Saigon Securities Inc. and ACB Securities, according to statistics from market regulators.
According to Bloomberg, Vietnam's market value of US$37.7 billion is equal to less than half the value of Walt Disney Co. The benchmark VN-Index gained around 17 percent this year after tumbling 27 percent in 2011. In the year ending July 31, the index rose only 2.16 percent.
Vietnam News reported Tuesday that the State Securities Commission is trying to hasten the restructuring of securities companies in an effort to reduce the number of brokerage firms from more than 100 to around 30.
On August 15, securities firms will be required to disclose their financial health to the State Securities Commission. After that, the commission will announce a list of securities companies placed under close scrutiny. Companies that fail to fix their shortcomings within six months will be dissolved, the report said.