Jjust three years ago, Vietnam was still a cipher in the worldwide economic system. The Southeast Asian nation had just ten listed corporations price $1 billion, while the every day trading volume on the stock exchange was about $100 million.
But the image today may be very different. It’s not exactly Wall Street, however the country’s financial center, Ho Chi Minh City, is heating up quickly, the South China Morning Post reports.
Last 12 months, Vietnam’s benchmark index jumped 47% to a 10-year high, making it the highest performer in Asia and third on this planet.
The Ho Chi Minh Stock Exchange grew by 75.2 percent in a 12 months to $115.46 billion, in line with annual statistics from the World Federation of Exchanges (WFE). The variety of listed corporations valued at greater than $1 billion, in addition to every day trading volume, tripled.
“Investors were attracted by Vietnam’s combination of economic growth and stability,” said Barry Weisblatt, head of research at Viet Capital Securities, adding that privatization also helped spur market activity.
Vietnam’s phenomenal economic growth – Maybank Kim Eng Research regional economist Chua Hak Bin called the country’s economy a “rock star” – is only a snapshot of the Association of Southeast Asian Nations’ (ASEAN) burgeoning capital market.
Growing in scale and class, markets like Indonesia and Thailand are difficult the established order.
New order
For the past 20 years, Singapore has been the undisputed leader within the region. ASEAN corporations in search of listings have considered the Lion City their first selection, especially given the republic’s exposure to international investors.
But the situation is changing rapidly, with economies like Indonesia, Thailand and the Philippines all in search of to dethrone Singapore, which currently holds the high position.
With a market capitalisation of US$787.28 billion last 12 months, Singapore was the sixteenth largest stock market within the Asia-Pacific region.
But its growth has been lackluster compared with others within the region. WFE data showed the Singapore Exchange’s (SGX) market capitalisation had risen 13.6% since 2016, compared with 37.3% for Hong Kong.
In Southeast Asia, the Ho Chi Minh Stock Exchange recorded the most important increase of 75.2%, followed by Indonesia (22.6%), the Philippines (22%), Thailand (15.7%) and Malaysia (14.5%).
In recent years, the SGX has struggled with a decline in IPOs, delistings and low liquidity.
In the primary quarter of 2018, the typical every day value of securities traded on the exchange was 1.45 billion Singapore dollars (US$1 billion), while the typical every day value of trading in Thailand, ASEAN’s most liquid market, was US$2 billion.
Regional exchanges have been more successful in attracting recent corporations, especially domestic ones.
Vietnam had the most important initial public offering (IPO) revenue in the primary six months of this 12 months, with three deals raising a combined $2.5 billion, in line with data compiled by EY. The communist country has more on its plate; it has scheduled IPOs for a complete of 64 state-owned corporations this 12 months, including telecoms firm MobiFone, and 18 others in 2019.
The largest variety of transactions – 19 – were concluded in Indonesia, generating revenue of $700 million.
Meanwhile, SGX attracted seven initial public offerings in the primary half of 2018, raising $400 million in revenue, mainly driven by the listing of Chinese shopping center operator Sasseur Reit.
Max Loh, EY’s managing partner for ASEAN and Singapore, notes that it’s natural that almost all listings outside Singapore come from local names. “There’s familiarity with the brand, the business and the market. All else being equal, companies tend to list on their domestic exchanges – as opposed to when their capital markets were less developed and SGX was the obvious choice.”
In fact, Indonesia has already declared its intention to challenge Singapore. It has tried to draw local corporations listed within the Lion City to list on the Jakarta Stock Exchange, in addition to foreign corporations operating within the country. The Indonesia Stock Exchange (IDX) can also be trying to increase its offerings, from local ETFs to derivatives, and displace SGX as the most important player in ASEAN by 2020.
Fight back
However, Singapore has no intention of giving up with out a fight.
The city-state’s stock exchange still towers above other regional bourses and stays a world financial centre.
Robson Lee, partner at law firm Gibson Dunn, notes that SGX also has a superb repute for transparency, governance and enforcement of securities laws and listing rules in comparison with other ASEAN countries.
“But it would not be an insurmountable threshold for other ASEAN stock markets and would not give SGX a run for its money in the future. SGX should not rest on its laurels,” Lee said.
Nevertheless, Singapore will proceed to play a key and essential role within the short term, at the same time as the situation changes.
It’s also working to remain ahead of the curve by specializing in technology stocks, which many see as the longer term of the economy. SGX recently announced moves to permit a dual-class share structure, as utilized by big tech corporations like Facebook and Alphabet, formerly often known as Google. “Singapore will remain a regional hub for some time, especially once the new dual-class share structure is allowed for certain types of IPOs,” said Romaine Jackson, head of Dealogic’s Southeast Asia operations.
This in turn could attract Chinese businesses and ASEAN tech unicorns which have not yet listed on stock exchanges.
“It will likely be interesting to see where a reputation like Go-jek will find yourself [a ride-sharing start-up comparable to Uber] in Indonesia will determine to list in the longer term,” Jackson said.
Long term, market observers consider the longer term may lie in cooperation, not competition.
On the economic front, ASEAN goals to create a typical market with the free movement of products, capital and other people, so it might be logical for the markets to be integrated as well.
Gibson Dunn’s Lee believes a more sustainable move can be to develop a pan-ASEAN stock exchange. That would create a more unified capital market with comparable listing rules and regulations in each country, allowing international investors to trade across the region.
The combined ASEAN entities would offer investors over 3,000 offerings, giving ASEAN a powerful position on the worldwide map.
Of course, such an idea may become a pipe dream. In 2013, the ASEAN Trading Link was arrange to attach the stock markets of Malaysia, Singapore and Thailand, however it closed quietly last 12 months because of lackluster investor interest. But for average investors in Vietnam, that won’t matter much. They may be content to reap the large rewards of an economy with an extended runway of growth.
Source: South China Morning Post
