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Hanoi, Ho Chi Minh City stock exchanges likely to be merged this year

Hanoi, Ho Chi Minh City stock exchanges likely to be merged this year

Sunday, April 19, 2015, 18:40 GMT+7

The Ho Chi Minh Stock Exchange (HOSE), which has operated for 15 years as one of the two main bourses of Vietnam along with the Hanoi Stock Exchange (HNX), may become a branch of a reunified trading floor when is established by the end of this year under a Ministry of Finance plan.

According to a proposal on the merger of the two bourses to form a single Vietnam Stock Exchange (VSE) submitted to the central government earlier this week, the headquarters of the VSE will be placed in Hanoi and the stock exchange will have a branch in the southern economic hub.

The merger will be realized by the end of 2015, according to the proposal.

After merging, the VSE will be a 100-percent state-run unit in the 2015-2020 period under the direct management of the Ministry of Finance.

After 2020, the proportion of the state ownership will be reduced to 75-90 percent. Meanwhile, member securities companies of the VSE will be allowed to purchase a 10-25 percent stake in the proposed new stock exchange.

In addition, the VSE will list all the securities in three markets including stocks, bonds, and derivatives, which will help save costs for market participants, according to the proposal.

Currently, the HOSE is managing big-cap stocks only, whereas the HNX is running smaller-cap stocks and those in the bond market.

Under dispute

However, this proposal of the Ministry of Finance has aroused controversy.

According to Hanoi-based economist Dr. Nguyen Tri Hieu, in other countries with developed financial markets, most of the headquarters of their stock exchanges are located in the financial hubs, where the stock and financial markets are growing at the fastest speed.

"As the principle of the world goes, the headquarters of any stock market are placed in a city where stock transactions are strong and thriving to create favorable conditions for all market participants," Hieu told Nguoi Lao Dong (Laborer) newspaper.

Disagreeing with that point of view, some economists said that the headquarters of the VSE should be placed in Hanoi, the capital of the country, near the offices of many ministries and state agencies from which policies on the stock market are issued.

Dr. Tran Quang Thang, director of the Institute for Research and Economic Management of Ho Chi Minh City, rejected the notion that the headquarters of the VSE should be put near state management agencies to facilitate administrative activities.

Dr. Thang told Nguoi Lao Dong that this way of thinking is outdated as the actual operation of the facility does not have to be connected to the administrative work, but it should be linked to transactions and trade.

Ho Chi Minh City, the country’ economic and financial hub which attracts both local and foreign investors so well, is the place where the stock market was born and has developed during the course of 15 years, he added.

The capitalization of all listed companies on the HoSE at the end of 2014 accounted for 88 percent of the total market and 25.5 percent of the national GDP, according to The Saigon Times Online.

In 2014, the average market value of a company reached VND3.23 trillion (US$148.6 million) and average transaction value of a session was up to VND2.17 trillion ($99.8 milion), making up 73 percent of the market liquidity, the news website said.

The HOSE built its new headquarters in the middle of last year, with funding from the Ho Chi Minh City administration.

The facilities were put into operation on July 28 with a big investment for modern technology.

The HOSE has a center, 26,000 square meters in area, which has high-tech equipment satisfying the criteria for data center installment for a large-scale open market.

Money was also poured into another data center with a total floor area of 16,000 square meters at the Quang Trung Software Park which is a place to store the data for all the units under the Ministry of Finance in the southern region in addition to acting as the reserve facility for the information technology systems of the HOSE, The Saigon Times Online reported.

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