Vietnam to welcome wholly foreign-capitalised stock market
Under WTO commitments, in January 2010, the 100 foreign-owned capital management funds, branches of foreign-owned securities firms will be allowed to join Vietnamese stock markets. Therefore, in the coming year, the domestic securities firms will have to face harsh competition with foreign stock brokers. In the latest interview conducted by Dau Tu Chung Khoan reporter, Nguyen Ngoc Canh, head of International Cooperation Department, State Securities Commission provided information about how the governance authorities support the domestic securities firms to integrate successfully.
What is the roadmap for domestic securities firms to carry out WTO commitments in the field of stock exchange?
Under the commitments relating to Vietnam’s stock services, after joining WTO in early 2007, the foreign-owned securities firms, fund management companies were able to contribute capital, purchase shares and establish joint ventures with maximum capital contribution ratio of 49 percent.
Under the opening roadmap that Vietnam had committed, the 100 percent foreign owned securities companies and fund management ones will be allowed to be set up in Vietnam after five years of becoming WTO’s official member. Accordingly, the capital contribution ratio of foreign partners in offering stock exchange services will be at maximised level by 2012.
Becoming WTO’s member is considered the important event that helps increase the foreign indirect capital in Vietnam. The roles of foreign investors, especially the professional ones have been proved to be positive factor in the development process of stock market. The value of foreign investors’ portfolio. Including large financial institutions such as JP morganm Menyll Lynch and Citigroup was estimated at about $6 billion at present.
What are the opportunities and challenges that domestic stock brokers have to face when realising the commitments?
When the financial market opens in accordance with WTO commitments, the domestic securities firms, fund management companies have to cope with fierce competition pressure with the foreign-owned ones. The challenge that the local financial institutions have dealt with was limited capital source. At present, the current securities firms have small-scaled capital source in comparison with the foreign stock brokerage groups, lacking business development strategies, and weak in management capacity against the foreign ones. In addition, the domestic securities firms have poor technologies due to lack of capital and human resources.
In your opinion, what should domestic stock brokers do for successful integration?
The local stock dealers should focus on developing their strong points and turn them into competitive advantages in integration context. Apart from that, the domestic securities firms also need to learn about the characteristics about culture, markets and investment environment to increase their influence, market shares in the market before the foreign organisations officially join the market. They should take advantage of close relations between enterprises and domestic investors to set up stable network of customers, especially those securities firms as they have parent companies of banks, insurance firms. This is the advantage that the securities enterprises have to concentrate on as the foreign firms cannot set up its customer network in a short time. In addition, the domestic stock traders also need to improve their human resource quality, access the world’s new products, modernise their technologies and develop their financial potentials.
What will SSC do to support the domestic firms in improving their competitive strength?
The WTO’s commitments have created pressure not only on enterprises but also the management authorities. It’s the challenge in managing the foreign-invested capital flow so as to not only increase the value for stock markets but also to use in right purposes, preventing the crisis in case the capital source reverses, causing negative effects on macroeconomic stability.
Therefore, together with improving the management capacity, the State Securities Commission also reinforce the legal framework to create favourable business environment for the participants in the market. In addition, SSC also need to issue legal documents to make transparent legal corridor for foreign enterprises, investment when joining the stock markets.
The governance authority encourages the enterprises to offer brokerage services to boost their financial potentials, and asks the enterprises to apply international standards to improve their technological capacity and train high-quality human resources.
Especially, SSC may consider to allow the establishment of open funds in Vietnam to improve the market liquidity for the stock markets.
Dau tu chung khoan
Tags: vietnam stock, Vietnam stock market
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