Bourse merger gains some greater traction

There is concern the market pie is being cut into too many pieces

The plan was discussed at a conference last week in Hanoi, jointly held by Luxembourg’s development co-operation agency Lux-Development.

Vietnam has two bourses operating separately, Hanoi Stock Exchange (HNX) and Ho Chi Minh Stock Exchange (HoSE), and a clearing and depositary service  centre - the Vietnam Securities Depositary (VSD). All three bodies are government run with no central clearing platform.

Running such incoherent operations was costly, stated the State Securities Commission (SSC). Trading fees for stocks in Vietnam amounted to 0.3 per cent of trading values on average, five times higher than Thailand and 12 times greater than Malaysia.

Despite being divided, each bourse lists both blue-chips and penny stocks as well as fund certificates in a single stock board, which is very inconvenient for foreign investors.

“It is hard for foreigners to distinguish between the HNX and HoSE,” said Lux-Development expert Hannes A. Takacs.

Nguyen Son, SSC’s spokesman, said that as the Vietnamese economy remained small, consolidating the securities market was indispensable.

The market watchdog has outlined three scenarios.

The first is to establish a single securities exchange by merging the two bourses. However, the problem was competition would be eliminated upon such a merger, replaced by the state monopolisation which could drag down development.

 The second is to set up a holding company which will wholly own the two exchanges and the depositary services centre, while maintaining the current separate operations of the two. The SSC, however, was concerned that efficiency of the holding company model in Vietnam had yet to be proved.

The third is to maintain the current operation and management features. In the future, another bourse might take shape for derivatives.

Son said the SSC was still making a research on the three options, a part of the government’s bids to restructure the stock market under its master market development plan towards 2020.

The HNX authority advocated the holding company model. Lux-Development said the holding company was the “most sanguine model.”

“All the options will be submitted to the Ministry of Finance for considering,” Son added.