Brokers, Miffed by MiFID? Try Vietnam

(Bloomberg Opinion) -- Brokers tired of dwindling bonuses may find riches await them in Vietnam.

Local securities companies have been making some high-profile hires in recent months. Mike Lynch, formerly a managing director at CIMB Group Holdings Bhd. in New York, moved to Ho Chi Minh City just over a year ago to head institutional equity sales at Saigon Securities Inc., the biggest local brokerage. Joining Lynch half a year later was Lawrence Heavey, who has a decade of Asian equities experience at CLSA Ltd. Other houses aren’t far behind. Ho Chi Minh City Securities Corp., one of Vietnam’s big three brokerages, in January brought on board Stephen McKeever, who led Asia ex-Japan’s equity sales at Mizuho Securities Co. in Hong Kong.

Brokers, Miffed by MiFID? Try Vietnam

What are these senior brokers doing in a place still deemed a frontier market by MSCI Inc.? 

Vietnam is a world away from Asia’s more established financial markets, where commission fees are being eroded by the MiFID regulations and stiff competition. Top brokerages still make at least 15 basis points on stock transactions, three times as much as in developed markets such as Hong Kong, where leading securities companies struggle to earn 5 basis points on institutional-client trades.

Adding to the lure of sweet commissions are strong animal spirits. The Vietnam Ho Chi Minh Stock Index was Asia’s best-performing benchmark last year and is still showing a return of about 28 percent over the past 12 months, despite a sell-off in recent days that pushed the gauge into a bear market as of Monday.

More importantly, there is churn. Vietnam’s stock market is a lot more liquid than those of Southeast Asian peers. The annual turnover ratio (trading volume as a percentage of market capitalization) was 32.6 percent in 2017, versus 11.6 percent in the Philippines and 17.8 percent in Indonesia, according to the World Bank. At its peak in January, average daily trading volume was more $300 million.

Brokers, Miffed by MiFID? Try Vietnam

Lured by an economy that grew 6.8 percent last year, even first-tier sovereign funds are marching in. This year, Singapore’s GIC Pte participated in luxury residential developer Vinhomes JSC’s $1.4 billion IPO, as well as the offering of Vietnam Technological & Commercial Joint Stock Bank, or Techcombank, a home lender backed by Warburg Pincus LLC. When it comes to servicing foreign institutional clients, experienced hires from the West are a safer bet than greener local talent.

And there are plenty of good jobs to go around. Vietnam’s securities industry is in its most favorable stage for employees — fragmented, and with no pricing pressure, yet. 

Brokers, Miffed by MiFID? Try Vietnam

Foreign brokers may find Ho Chi Minh City fertile ground for their personal accounts, too. From buying real estate to funding startups, their wealth could multiply in just a few years. 

Foreigners are now allowed to buy up to 30 percent of units in approved real estate developments. For instance, Singapore-based CapitaLand Ltd. has been selling apartments in its high-end De La Sol project for the equivalent of about $350 per square foot, the South China Morning Post reported. That’s less than half the price of comparable projects in Thailand. Renting out apartments in the city’s central business district offers an attractive 6 to 9 percent yield. 

When it comes to funding the next hot startup, investors may find their Singapore or Hong Kong dollars go a long way. Marc Djandji, head of institutional sales at Rong Viet Securities Corp., has a stake in Saigon-based micro brewery Pasteur Street Brewing Co. The potential of this thirsty, young consumer economy was underlined when Thai Beverage Pcl paid $4.8 billion for control of Saigon Beer Alcohol Beverage Corp. in December.

The danger of uprooting your family and moving to Vietnam, of course, is that the boom will turn suddenly to bust, much as China’s retail-driven market did in 2015. Still, the potential to make a fortune is there. As every broker knows, risk and reward go hand in hand.

©2018 Bloomberg L.P.