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Market needs better brokerage service
David Ying, chief representative of SYSTEX Corporation, offers his personal views on the stock market and its future
The past year was volatile worldwide, and Viet Nam's stock market was no exception. On the opening day of trading on the HCM City Stock Exchange in 2008, the VN-Index reached 921 points, not an historic high but something close.
By December 25, the Index had plunged to a mere 302 points, a third of its value at the beginning of the year.
But, despite the global financial crisis, Viet Nam has 95 licensed securities companies, ranked third among ASEAN countries in terms of the number of the brokerage houses (95), behind only the Philippines (184) and Indonesia (121).
In stock market capitalisation, however, Viet Nam was ranked last among all major ASEAN states with stock markets, with total market capitalisation of US$11.36 billion and an average daily turnover on the market of just $46.51 million. That's only a tenth of Thailand's and just 4.5 per cent of Singapore's.
From the above statistics, it's obvious that competition among brokerage houses in Viet Nam during 2008 was tense, if not cutthroat. Liquidity of shares was also a major concern for average investors, not to mention foreign institutional investors. A severe market situation is still ahead in the coming year, so it's almost needless to say that "survival of the fittest" will be norm throughout 2009.
Worse to come
Re0cently, I visited several securities companies in HCM City. The majority of trading floors of these brokerages had many empty seats waiting for retail clients. One senior staffer at a famous securities company predicted that the worst was yet to come. He said his company was already prepared for the most severe situation in 2009, including but not limited to budget cuts, selling assets to raise cash, and laying off employees.
Where did all the investors go? We still saw crowds on the gold trading floors and active subscriptions to the Vietinbank and Eximbank IPOs. Frankly speaking, investors are still very cautious about equity investment due primarily to the recent global financial turmoil and past unhappy experiences. No clear signs suggest that the worst is over. Many institutional and individual investors are asking, "How did the financial tsunami adversely affect the 300 listed companies in Viet Nam?" It won't dust out until the annual reports are released in early 2009.
To survive, brokerage houses need to be conceptually reequipped and revamped, without big expenditures; retail investors also have to be re-educated, reshaped and encouraged as most of them incurred losses in the past one way or the other. In order to call them back to the market, it is imperative to begin providing real-time financial information to retail investors. Courses and seminars to introduce online trading need to be conducted and other new services should be in place.
More aggressively, to attract retail investors to commit their capital once again, new investment instruments have to be created. To fully utilise current employees and facilities, brokerage houses should develop and introduce new investment instruments, such as investing in fixed incomes or Exchange-Traded Bond Funds (ETFs in government bonds), for their clients to park money in a safer haven while waiting for opportunities.
Future perspectives
It was very painful to watch the recent financial turmoil change Wall Street and it no doubt reshaped the securities market landscape in Viet Nam. In the foreseeable future, marginal brokerage houses will be restructured and the lucky ones merged into stronger ones equipped with experienced and innovative staff and higher market awareness and recognition. Brokerage is a service business, and it is human nature that good people are always looking for reputable houses. Only good staff can provide better services.
At the end of day, whoever is well-capitalised, well-staffed, innovative in developing new financial instruments, and providing prudent services to their clients, e.g., electronic trading, real-time financial information, regular investment seminars, and advanced trading knowledge and devices, will ultimately be the winners.
Viet Nam News
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