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Jan 21, 2020 / 09:47

New foreign companies reshape Vietnam’s securities brokerage market share

Vietnam's stock market remains appealing to both domestic and foreign brokerage houses.

The Vietnam’s stock brokerage market share has experienced big change due to the strong participation of foreign securities companies, especially of Korea-invested ones.

MAS was in Vietnam’s top 10 biggest stock brokerage companies last year.

According to data from Ho Chi Minh Stock Exchange, the club of top 10 biggest stock brokerage companies in 2019 saw the presence of new foreign-invested entrants: Mirae Asset Securities Vietnam (MAS) and KIS Vietnam Securities (KIS). The companies, both local subsidiaries of South Korean firms, for the first time took the sixth and tenth position, respectively.

The change has been forecast as just after a short time entering the Vietnamese market, with strong financial backing from parent companies, Korean securities companies have quickly increased their charter capital and become a formidable competitor for domestic firms.

In fact, domestic brokerage giants have been facing increasing competition from South Korean securities firms who have been active in raising their charter capital and carrying out a series of mergers and acquisitions in 2019, trying to tap a young but potential market.

MAS, the first large Korean securities company to enter the Vietnamese market, has been aggressive in expanding its business since acquiring a license to trade in derivative products since the end of 2018. In mid-December, the subsidiary of South Korean finance giant Mirae Asset Financial Group announced it had successfully raised its charter capital to VND5.46 trillion (US$235.5 million), becoming the broker with the largest charter capital in Vietnam market.

Mirae Asset had continuously pumped capital into MAS, raising its charter capital from VND300 billion (US$12.9 million) to VND4.3 trillion (US$185.4 million) between 2016 and 2018.

It is said that the Korean company will continue to increase capital sharply to VND10 trillion (US$429 million) this year.
According to Kang Moon Kyung, General Director of MAS, the company belongs to a Korea's leading financial group with total assets under management of up to US$369 billion, so the capital increase is entirely within the capacity.

In the coming time, there will be strong capital hike from the group, but specific capital increase will be in its long-term investment roadmap, Kyung said.

Several other South Korean-owned securities companies in Vietnam have also increased their charter capital in the last two years.
KIS Vietnam, owned by Korea Investment & Securities Co., Ltd, raised its charter capital by VND784 billion (US$33.8 million) to nearly VND1.9 trillion (US$81.93 million) in mid-2018, while Shinhan Vietnam, owned by Seoul -headquartered Shinhan Bank raised it by VND145.4 billion (US$6.27 million) to VND812 billion (US$35 million).

Another firm, KB Securities Vietnam (KBSV), set up in early 2018 after South Korean KB Financial Group acquired domestic Maritime Securities for US$33.2 million, had its charter capital raised to VND1.1 trillion (US$47.4 million) in December 2018, and to VND1.67 trillion (US$72 million) in the first quarter of 2019.

Interest rate advantages

Pumped by big money, margin lending at foreign securities companies has developed strongly. The outstanding value of margin loans at Mirae Asset Securities has increased to VND6.6 trillion, for the first time surpassing leading domestic securities firms – Saigon Securities Incorporation with VND5.31 trillion and Ho Chi Minh City Securities Company with VND4.67 trillion.

Margin loans of other Korean companies also increased such as KIS (VND2.64 trillion), KB Securities Vietnam (VND1.8 trillion), not much inferior to large domestic firms such as VNDirect (VND2.95 trillion), Vietcombank Securities (VND2.9 trillion) and MB Securities (VND2.4 trillion).

Some foreign companies are also competing with zero fee policies offered by Korea’s Pinetree Securities Co with free lifetime transactions or Vietnam Cyberspace Securities Technology to lure investors.

According to experts, in South Korea, deposit interest rates are currently low at about 1-2%, so margin lending is an effective investment. Meanwhile, local securities companies struggle to borrow at low-interest rates to race to reduce fees and margin interest. Therefore, the competition for domestic securities companies in the market share race is forecast to be even tougher next time.