South Korean securities companies are expanding their presence in Vietnam, an emerging market with high growth potential. Vietnam is the only Southeast Asian country where the Big Five of South Korea’s 10 major securities firms run business.
Most recently, KB Securities Co., through its subsidiary KB Securities Vietnam (KBSV) has increased the number of its branch offices in Vietnam to four by opening an office in Ho Chi Minh City. With the expansion of the branch network, the bank is planning to break into the investment banking (IB) market.
Other Korean security companies have been equally busy:
• Korea Investment & Securities Co. obtained a license for derivative products on the Hanoi Stock Exchange in July 2018 – for the first time among foreign securities companies and the eighth time among all securities firms in Vietnam.
• Mirae Asset Daewoo Co., the first large Korean securities company to enter Vietnam market, has been aggressive in expanding its business. The firm acquired a license for derivative products and the end of 2018 and has raised the capital of its local subsidiary to $194 million USD through two rounds of capital increases, the third largest among 70 securities companies in Vietnam.
• NH Investment & Securities Co. is also planning to enter the derivative market after turning its joint venture in Vietnam into a wholly owned subsidiary in April 2018.
• Samsung Securities Co. is seeking to trade stocks and exchange research through a partnership with a large local securities firm, Ho Chi Minh City Securities Corp., rather than launching a local subsidiary.
• Shinhan Investment Corp., which entered Vietnam later than its competitors, successfully managed a Vietnamese company’s detachable bond with warrant issuance in November 2018, a first for Korean brokerages in Vietnam. The issuer was An Phat Plastic, the largest plastic packaging producer in Southeast Asia, and the scale of issuance amounted to $17 million USD.
South Korean securities companies are regarding Vietnam as a key market in Asia due to its high growth potential. The country’s economy has expanded by some 6% per year since 2014 and Vietnam’s economy grew 7.08% in 2018, the highest growth figure in 10 years, surpassing the government’s goal of 6.7%. Vietnam has consolidated its position as a post-China market as China’s economic growth has slowed down.
The Vietnamese stock market surged nearly 50% in 2017 compared to a year earlier but it is going through ups and downs amid concerns about stock markets in emerging countries as a whole and the trade dispute between the United States and China last year. The Vietnam's benchmark VN-Index hit a record high of 1,204.33 in April last year but plunged to 878.22 on January 3rd this year.
However, there is still faith in rising Vietnamese stock market. Its high price-to-earnings ratio (PER), which made investors hesitate to make an investment in Vietnamese stocks, is also becoming stable. The PER, which soared to 20 times early last year, decreased to 15 times on average. It is now approaching 15.7, the average PER in the past three years.
Many market experts say the Vietnamese stock market is still undervalued. Kim Ye-kyung, senior researcher of the financial rating division at NICE Investors Service, said, “Unlike in neighboring countries where market cap exceeds 100% of gross domestic product (GDP), the market cap of the Ho Chi Minh Stock Exchange accounted for only 59.6% of GDP as of the end of November last year.”