Foreign investors turn up noses on brokerages

Foreign investors turn up noses on brokerages

After September 15, when Decree No 58 takes effect, the number of foreign-invested brokerages will remain low even though the previous 49 per cent maximum ownership limit has been scrapped.

On July 20, Decree No 58/2012/ND-CP was issued, guiding the implementation and amendment of the Law on Securities.

Foreign organisations that meet the conditions will be allowed to own 100-per-cent of the charter capital of operating securities companies or to set up a new 100-per-cent foreign-invested securities company.

Although the decree will go into effect in a few days, the local securities market has yet to see many changes.

The local stock market has 105 operating securities companies, of which 15 are invested in by foreigners, who own 49 per cent of their charter capital.

Twenty-five other securities companies have between 20 and 25 per cent of their chartered capital owned by foreigners.

Most foreign stake-owners at Vietnamese securities companies come from Asia, many from Japan, Malaysia and Singapore.

In recent years, many foreign companies invested in Viet Nam's stock exchange market because the prices of shares of local securities companies were low due to sluggish market conditions. The prices were especially low compared with those of securities companies in other countries in the region.

In February 2011, Nikko Cordial Securities Inc. bought 8,916,300 shares or 14.9 per cent stake of PetroVietnam Securities Incorporated (PSI), becoming a major shareholder of the listed firm.

Prior to that, ROK Securities and Investment Company purchased nearly 49 per cent of the stake of Vietnamese Gia Quyen Securities Company (EPS), intending to purchase EPS in anticipation of Decree 58 that will allow them to set up a wholly foreign-invested securities company.

Huong Viet Securities Company also sold 48.33 per cent of its stake to Singaporean Morgan Stanley, while Click and Call sold 49 per cent of its stakes to South Korean Golden Bridge.

In addition, Viet Nam Securities Company sold 49 per cent of stakes to Malaysian HB Bank.

In spite of these changes, the number of wholly foreign-invested securities companies will not be as high as expected.

Several limitations remain in Viet Nam's stock exchange market. It is still small-scale and has strong fluctuations and low liquidity, with total capitalised market value of only US$25 and $30 billion, equivalent only to 0.5 and 1.5 per cent of many markets in the world.

Also, many securities companies have been established at a time when the country's stock exchange market is too small, thus creating unhealthy competition. Legal regulations related to securities activities are also still unclear, making management of the local stock exchange ineffective.

Only a few foreign-invested securities companies in Viet Nam are profitable, another reason many foreign companies are not setting up business.

Low home loan rates

Since September, HDBank will offer loans with the low interest rate of 8.6 per cent per year to people who want to buy housing.

ANZ is also offering loans at an interest rate of only 11.8 per cent per year for those who want to buy houses. HSBC, Vietcombank, BIDV and VIB are lowering the interest rate of loans provided for people to buy houses to between 9 per cent and 9.9 per cent per year.

Preferential credit packages that the banks have set aside for the real estate sector are worth thousands of billion dong.

BIDV, ACB, Vietcombank, VIB, VietinBank and SeaBank alone have committed to provide loans worth VND20 trillion for property buyers.

The banks are actively trying to increase credit growth targets set for the year.

To pump money into the real estate market, the banks have cooperated with owners of real estate projects to lend people who want to buy houses and land plots. However, the amount of loans has been modest.

Last month, the Tan Binh Construction and Investment Company decided to sell 60 apartments in its Tan Mai project in Binh Tan District.

To attract customers, the company joined hands with two banks to offer buyers loans at the interest rate of 13 per cent per year and the maturity of between 10 and 20 years.

However, only four buyers wanted to borrow money from the banks to buy the houses.

Vietinbank has set aside VND5 trillion worth of loans for individuals who want to buy houses.

The bank has worked with 40 real estate project owners and has been ready to offer loans at an interest rate of only 8 per cent per year for those who buy apartments, and a rate of zero per cent for some projects.

The bank hopes that its loans at such preferential interest rates will encourage individuals to buy apartments. As a result, project owners will be able to sell their apartments and have money to pay back bank loans. The bank can then offer more new loans to the real estate market.

However, the banks' efforts in lending to the real estate sector have proved ineffective as only a small number of people have sought bank loans to buy houses at this time.

People are hesitant to borrow money because, although the banks' loan interest rates have been lowered, they are still high compared with the house buyers' financial potential.

In addition, the banks' loan interest rates are unstable. People who want to buy houses will be offered preferential loans within a few months and they then may have to suffer between 14 per cent and 18 per cent per year for the loan maturity.

The fact also shows that the prices of properties have been cut, but they still stood at a level higher than expected.

So, many people do not want to borrow money to buy houses at this time and want to wait for a further reduction in pricing.

Tran Van Thanh, general director of the House Viet Nam joint-stock company, said that few banks had offered loans for property projects.

Thanh, however, said that many real estate developers did not want to borrow funds now, even with lower interest rates.

This is because the former were unable to sell their projects so they do not have the money to pay the interest rate.

Although banks want to offer more new loans to the real estate sector, they have also been careful about lending. They lend only to those who buy apartments in highly feasible projects.

Baking up business

Last week the 19th store of South Korea-based Tous Les Jours opened in District 3's Cao Thang Street, heating up competition between local and foreign pastry makers.

On Cao Thang Street, there are seven pastry stores side by side. They include South Korea's Paris Baguette, Singapore's Breadtalk, and Vietnamese shops, Givral, Kinh Do, Sweet Home Bakery and Duc Phat.

In recent years, many famous chains have penetrated the market with special selling points and products, as well as attractive premises and designs.

One of these is Tous Les Jours, which is a South Korean franchise owned by CJ Foodville, a business group under the CJ Group.

It opened its first store in HCM City in June 2007 and has expanded its chain quickly here. Its store chain is expected to reach a total of 30 in Viet Nam by the year-end.

Another foreign pastry company is the South-Korea based French Boulangerie. It began in 1988 at a single location and has grown to become the No. 1 franchise bakery in Korea. There are more than 1,700 locations in three different countries.

The company opened in Viet Nam in April this year and is going to open its third store in October.

Two other famous pastry chains with Singaporean names are also important contributors to the Vietnamese market: Bread Talk and Lovebread. In spite of being present in Viet Nam for only two years, Bread Talk has six stores in the country.

Lovebread now has 16 stores located in the Co.opmart system. It opened its first shops in Viet Nam in 2004.

Most of these famous pastry places chose HCM City as their first destination in Viet Nam to build up brand names in the country. They then spread them to other localities.

Most foreign coffee shops are located in the centres of major cities, where they can be more competitive.

Their presence, however, has created fierce competition for Vietnamese pastry makers to retain market share and their image.

Local shops will have to keep renewing and updating their products and services so they can remain alive in the market.

Kinh Do, for example, a well-known Vietnamese pastry and cake company has set up a chain of Kido Bakery&Cafes that have a new style quite different to the company's old chain.

Givral has also set aside significant investments, with the purpose of renewing its stores, so they can serve customers on the spot.

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