VietNamNet Bridge – Vietnam would open its market doors to 100 percent foreign owned securities companies from September 15. However, experts do not think that there would not be a new foreign investment wave in the field.
Fifteen out of the 105 securities companies in Vietnam have the foreign ownership ratio of 49 percent, with the foreign partners mostly from Asian countries such as Japan, Malaysia and Singapore. Other companies have lower foreign ownership ratios, at 15-20 percent.
In some securities companies, the foreign investors hold 5-10 percent of total stakes, mostly ETF investment funds. Twenty seven securities companies are listing their shares on the bourse, while 20 companies have the foreign ownership ratios at below five percent.
Vietnamese securities companies once foreigners’ focus of interest
In 2011, a lot of foreign companies in Asia hunted for the stakes of Vietnamese companies with an aim to take over the companies, once Vietnam officially opens its market to wholly foreign owned securities companies, slated for 2012.
2011 was the right time for foreign investors to buy Vietnamese shares, which became the cheapest in the region. Japanese Nikko Cordial bought 14.9 percent of the stakes of PSI at 15,000 dong per share. The value of the deal was 133.7 billion dong, or 6.9 million dollars.
Prior to that, a South Korean investment and securities company successfully bought roughly 49 percent of the stakes of EPS Company, planning to buy the whole EPS once foreigners are allowed to set up 100 percent foreign owned securities companies in Vietnam.
Huong Viet Securities Company transferred 48.33 percent of stakes to Morgan Stanley (Singapore), while Click & Call sold 49 percent of stakes to South Korean Golden Bridge Company, Vietnam Securities Company sold 49 percent of stakes to Malaysian RHB Bank.
Under the Decree No. 58 guiding the implementation of the Securities Law which takes effects on September 15, the foreign investors who have been operating in the fields of banking, securities and insurance for two years at least, now can capital contribution and buy stakes to possess 49 percent of stakes of a securities company; or buy and set up 100 new percent foreign owned securities companies.
Market barriers awaiting foreign investors
A banking expert has noted that foreign investors from Europe and the US tend to buy the whole companies or set up 100 percent foreign owned companies, instead of holding 65 or 75 percent of stakes, in order to have the right to manage the companies their own way.
They fear that the cultural and business differentiations and the viewpoints between foreign and Vietnamese businessmen would lead to problems.
However, though the market now opens widely to foreign investors, experts do not think that foreign investors would flock to Vietnam in masses. No big European or US investment funds or finance companies has bought the stakes of Vietnamese securities companies over the last two years.
There are three reasons behind this. Firstly, the Vietnamese market remains too small with low liquidity in comparison with the US market, European countries and China. The capitalization value of the market is modest, just 25-30 billion dollars.
Secondly, there are too many securities companies (105) on a too small market, thus forcing the companies to struggle hard to survive and develop.
Thirdly, the legal regulations on the stock market management are still lacking, thus worrying foreign investors.
Finally, it seems that very few foreign invested securities companies can make profit, while the majority of companies did not satisfy with their business results of the last three years.