<article>After executing a spate of mergers and acquisitions in the banking and the real estate sectors, Vietnam&#8217;s government is now considering the merger of its two independent stock exchanges.</article>

After executing a spate of mergers and acquisitions in the banking and the real estate sectors, Vietnam&#8217;s government is now considering the merger of its two independent stock exchanges.
The consolidation of the <a href="http://hnx.vn/web/guest/cau-truc-thi-truong">Hanoi Stock Exchange</a> (HNX) and the <a href="http://hsx.vn/">Ho Chi Minh City Stock Exchange</a> (HOSE), was proposed by the Vietnam Association of Securities Business (VASB). The proposal has been put into the state’s master plan and will see the restructuring of the 15 year old local stock market, after which the merged exchange will be equitised.
“The spectrum of grouping them into one organisation is to form a stock exchange large enough to compete with other big trading platforms in other countries,” said VASB president Le Van Chau.
This is in line with other aspects of the market restructuring plan, especially the diversification into new products (derivatives, option and futures contracts), which will need to be consistently governed by a single entity.
The next step is to privatise the stock exchange with the priority to sell stakes to securities firms, fund management companies and credit institutions.
In such system, these units will be at both owners and participants in the market, thereby creating internal relationship between financial institutions and increasing their responsibilities for the market.
According to the resturcturing plan, the listed shares on the HNX will be gradually shifted to the HSX. Meanwhile, the Hanoi bourse will concentrate on developing specific trading floors, like bonds, derivatives and the unlisted public company market (UPCoM).
To get ready for the merger, the <a style="color: #000080" href="http://ssc.gov.vn/ubck/faces/en/enmenu/enpages_home?_adf.ctrl-state=ay6lte6bb_4&amp;path=%2Foracle%2Fwebcenter%2Fportalapp%2Fpagehierarchy%2Fpages%2Fen%2FenmainmenupagesPages.xml&amp;_afrLoop=4885454746621566">State Securities Commission</a>, had raised the listing standards for businesses in 2012. Along with a spate of criteria in terms of profitability and the minimum rate of shares with voting right, the new standards require the firms to have a least registered capital of VND120 billion ($5.6 million) on the HSX and VND30 billion ($1.4 million) on the HNX, from the previous respective levels VND80 billion and VND10 billion.
Proposed in 2011, the merger has not been realised, yet.
The most obvious hindrance is the difference in listing standards. A great part of HNX-listed firms will not be eligible for trading on the HSX. Chances are they will increase their charter capital. But then, the question is how effectively will these companies use the money?
However, the Vietnamese ministry of finance is determined in this plan. This year, it has again called for the collaboration of the parties related to the merger, to “enhance the position of the Vietnam Stock Exchange (the intended name) in the ASEAN region”.
<h3>Voice of the game players</h3>
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In merging the stock exchanges, the biggest challenge is to ensure a consistent structure of the united organisation. Tran Van Dung, chairman and CEO of the HNX, thinks this will be the resonance of strengths from both sides. “Once we are merged, not any of us think one will be the main functional engine of the stock market, while one is a supporting agency,” he told the <a href="http://vneconomy.vn/chung-khoan/hop-nhat-hai-so-giao-dich-chung-khoan-loi-ich-la-so-mot-20130206044740788.htm">VnEconomy</a>.
After the merger, the two bourses will cooperate to comprehensively develop sub-markets of stock, bond and derivatives. The different tasks might be specialised by each party, but they will be responsible for jointly building a sustainable stock market.
The local market had earlier witnessed a &#8220;booming” period, which led to overpricing. The listed companies issued additional shares without effective capital use, and brokerages extended large amount of credit for purchase of shares, ushering in a prolonged sluggish market and the collapse of a series of securities firms.
More than 30 per cent of securities firms reported losses in 2013, the percentage declined slightly in 2014. Several brokerages announced termination of operation, such as <a style="color: #000080" href="http://www.kvs.com.vn/">Kenanga Vietnam</a>, Sao Viet, Au Viet, Cho Lon, etc. Others were merged or suspended. The total number of these companies was thus reduced to about 81 active firms.
The northern bourse in recent years has raised higher awareness of corporate governance among listed companies through several training courses and awards for the best governed firms. It has also digitalised clerical procedures of submitting information disclosure through the corporate information management system (CIMS), which has improved the situation of information disclosure significantly. The percentage of disclosure violations declined some 70 per cent right after the CIMS was applied.
The HNX listed companies have smaller scale than those on the HSX. Dung said, and the HNX is helping them in building their corporate image.
By the end of last year, the Vietnam’s stock market capitalisation reached VND1.12 quadrillion ($52 billion), almost 90 per cent of which came from the HSX.
The southern exchange’s chairman, Tran Dac Sinh, said that it was small as compared to the other markets in the region, i.e it is about one tenth the size of Thailand, a sixth of the Philippines and a fourteenth of Singapore.
Although he does not directly share his view on the merger, Sinh alluded that the consolidation will help reduce operational costs, thereby increasing competitiveness of the market.
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<a style="color: #ff0000" href="http://www.dealstreetasia.com/stories/vietnam-consolidates-banks-to-form-regional-lenders-4144/">Vietnam consolidates banks to form regional lenders</a>

Merging Vietnam’s two independent stock exchanges will be the next milestone for the Southeast Asian nation’s economy.

Vietnam to merge stock exchanges for increasing market competitiveness

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