Vietnam bourses inch closer to merger

Tran Van Dung, chief executive of the Ho Chi Minh City bourse, speaks to reporters on April 11.

The country has a pair of independent bourses — the Hanoi Stock Exchange, or HNX, and the Hochiminh Stock Exchange, or HOSE. Operating costs are weighing on both listed companies and investors.

By cooperating, the exchanges aim to standardize information and data systems, develop the corporate bond market, and strengthen corporate governance and supervision in line with international practices. 

The two bourses are likely to integrate eventually, HOSE chief executive Tran Van Dung said, in order to create a better investment environment, improve transparency and build trust in the local market.

Vietnam has to pursue the integration process “to upgrade the stock market to the international standard,” he said.

One-stop shop

Last year, Vietnam’s Ministry of Finance announced a plan to merge the exchanges into a single state-run Vietnam Stock Exchange. The goal was to carry out the merger by the end of 2015, but progress has been slow. A proposal to base the new entity in Hanoi sparked debate, since Ho Chi Minh City is considered the country’s economic hub.

Under the plan, the HOSE would be a branch of a unified trading floor. The first and larger bourse, it accounted for 87% of the two exchanges” total market capitalization of about $58 billion, as of last Wednesday. Investors, especially international players, typically look at the VN30 or VN-Index, covering shares listed on the Ho Chi Minh City bourse. The HNX is the popular platform for bonds.

Last year, the HOSE celebrated its 15th anniversary by deploying high-tech equipment for a large-scale open market and setting up a data center. The bourse’s market capitalization rose 16% in 2015, to $51 billion, with 347 listings.

The HOSE’s trading value in the first quarter of 2016 hit 130 trillion dong ($5.8 billion), up 33% on the year. Trading by foreign investors increased over the previous quarter in terms of both volume and value. Their buying accounted for 17% of the total, while their selling amounted to 17.9% — up from 14% and 13.6%, respectively, the previous year.

The HOSE, meanwhile, is working on covered warrant products and plans to start derivative trading in the second half of this year.

Tran Van Dung, who previously served as chairman and general director of the Hanoi exchange, became vice chairman and general director of the HOSE in March. This, too, was part of the government’s efforts to speed up the integration.

The chief executive has also worked at the central bank and state securities commission. He joined the HNX when it was set up in 2005. The government hopes his experience will make for a smooth merger.

Tran Van Dung told the Nikkei Asian Review that Vietnam is not looking to imitate any particular overseas bourse, but that it is carefully studying past exchange mergers — including the integration of the Tokyo and Osaka markets.

“The most important reason for the merger is to create a one-stop shop securities market for investors,” he said, “as Vietnam becomes deeply integrated in the global economy.”