South Korean brokerages on the way to dominate the market

December 23, 2020 - 07:28

The abundance of capital based on low-interest loans has helped those firms offer lower margin lending rates to investors, thus gradually winning the market shares from local companies.


A trading room at KIS Việt Nam Securities Co. — VNA/VNS Photo Trần Việt

HÀ NỘI — After recent merger and acquisition (M&A) deals, South Korea-owned securities firms are expanding their influence on the Vietnamese stock market.

On September 17, Asam Asset Management completed acquiring 65 per cent of capital at SJC Securities for VNĐ6,000 per share.

The South Korean firm was estimated to have spent VNĐ80 billion on the share purchase, which then helped it hold 80 per cent of capital at the local firm.

After the deal, the number of South Korea-invested securities firms in Việt Nam reached eight – half of all active foreign brokerages in Việt Nam.

Of the top 10 brokerages with the largest charter capital in Việt Nam, three come from South Korea – Mirae Asset, KIS Việt Nam and KBSV.

These three companies have charter capital of VNĐ5.45 trillion (US$236.8 million), VNĐ2.6 trillion and VNĐ1.67 trillion, respectively. Mirae Asset is also the second-largest brokerage by charter capital after the Vietnamese firm SSI Securities.

Other South Korea-owned securities firms are mulling capital hikes such as JB Việt Nam and Shinhan Việt Nam to increase their impact on the local market, sources told Đầu tư (Investment) newspaper.

Those three firms have also made big improvements in the ranking of top brokerages with the largest stock-broking market shares in 2019-20.

According to market regulators, the penetration of South Korean businesses has helped restructure the market, removing companies that are weak and insufficient.

Low lending rates

The abundance of capital based on low-interest loans has helped those firms offer lower margin lending rates to investors, thus gradually winning the market shares from local companies.

As of the end of the third quarter, total outstanding loans – comprising of margin lending and borrowing – was up 19 per cent quarterly and 33 per cent annually to VNĐ66 trillion and the South Korean firms are increasing their shares, a report by showed.

Mirae Asset, KIS Việt Nam and KBSV have loaned out a total VNĐ9.67 trillion, VNĐ3.85 trillion and VNĐ2.64 trillion, respectively. Those companies are among the 10 biggest lenders on the securities market with Mirae Asset taking the top spot.

The availability of cash provided by South Korean firms has helped trim the market’s average margin lending interest rate in 2020 to 10-12 per cent per annum from 13-15 per cent per annum in previous years.

In addition, Việt Nam-focused securities firms have been encouraged to offer incentives to investors, which include a 5-9 per cent average lending interest rate for VIP clients and a 0-0.25 per cent trading fee range.

It is obvious low margin lending and trading fee rates will remain key to the competitiveness of securities firms, especially when the spread of the coronavirus has had a negative impact on the local economy, the business community and bank lending rates.

Banks’ low interest rates have encouraged more people to activate their trading accounts and spend more money buying and selling shares on expectations of high returns. A total of 253,000 new accounts have been opened so far compared to a total of 64,000 accounts opened in 2019.

According to specialists, the appearance of large-cap corporations such as Samsung, CJ and Shinhan has driven South Korean financial firms to move to Việt Nam to provide low-cost financial solutions for the market.

In addition, there is still room for improvement for the Vietnamese securities market. South Korean investors have recently poured hundreds of millions of dollars into domestic companies such as Vingroup, Masan and the Joint Stock Commercial Bank for Investment and Development of Việt Nam (BIDV).

The positive outlook of the Vietnamese economy, bolstered by the trade agreements signed with other countries and economic blocs, has also attracted South Korean investors.

Moreover, Việt Nam is now known as the superstar of the world when dealing with the COVID-19 pandemic while keeping the economy propelling to rise among the best-performing economies this year.

Future plans

Mirae Asset Việt Nam’s CEO Kang Moon Kyung said that the company would promote investment banking (IB) and proprietary investment (PI) in the short term.

Mirae Asset would look for opportunities in share and bond trading, and increase the trading of other securities products such as covered warrant, derivatives and exchange-traded fund (ETF) certificate.

KIS Việt Nam would enhance its individual services and bond issuance consultancy, the company’s CEO Park Won Sang said.

Meanwhile, KBSV Securities would keep introducing Vietnamese assets to the international market, including South Korea and Hong Kong. JB Financial Group is planning to promote the trading of real estate and infrastructure projects for South Korean investors, back Vietnamese firms to issue bonds and shares, and expand the influence in M&A activities. — VNS