Vietnamese Capital Market: Types of securities Participants Presentation

On July 11th, 1998, The Prime Minister issued Decision No. 1271998QDTTg on the establishment of two Securities Trading Centers in Hanoi and Ho Chi Minh City under the management of the State Securities Commission (SSC) of Vietnam. The Stock Trading Center of Vietnam is also the official mechanism.There are 120 listed bonds with a total market capitalization of US866m.

Vietnamese Capital Market Types of securities & Participants Outline Historical development of Securities in Vietnam Major participants in the Vietnamese capital market Types of securities traded on the market Issuing securities Historical Development  On July 11th, 1998, The Prime Minister issued Decision No 127/1998/QD-TTg on the establishment of two Securities Trading Centers in Hanoi and Ho Chi Minh City under the management of the State Securities Commission (SSC) of Vietnam   The Stock Trading Center of Vietnam is also the official mechanism There are 120 listed bonds with a total market capitalization of US$866m HoChiMinh Stock exchange (HOSE)  Augurated on July 20, 2000  Trading commenced on July 28, 2000 with types of listing stocks in the first trading session  Transferred the Ho Chi Minh City Securities Trading Center to HoChiMinh Stock Exchange (HOSE) on July 11th, 2007 Hanoi Stock Exchange (HNX)  Is a trading market for stocks of small and medium-sized enterprises in Hanoi  Was officially inaugurated putting up a new milestone of Vietnam’s securities market on March 08th, 2005  Was awarded Third-Rank Labor Medal by the State for outstanding achievements in the development of the stock market in 2008 Major participants Issuers Dealers Regulators Investors Issuers Listed companies    Number: >300 16% of them made loss and 60% had profits decreased in 2011 80% were underpriced Unlisted public companies   Number: >450 Issuing shares to UPCOM Government  Market capitalization from bonds: VND 81.5 trillion (2011) Total market capitalization of VND 602 trillion, accounting for 25% of GDP in 2011 Dealers Securities companies (103)  Operations: Securities Fund management companies (47)  Operations: securities brokerage, underwriting, investment fund management securities buying and selling, and securities portfolio securities investment management advisory  >60 made loss in 2011  24 made loss in 2011 Regulators  State Securities Commission of Vietnam (SSC): was established in 1996, belonged to Ministry of Finance  Stock Exchange:  Ho Chi Minh Stock Exchange (HOSE) – 2000  Hanoi Stock Exchange (HNX) -2005 Investors Individual  >95% of investors in Vietnamese capital market  Small investment capital Institutional   Very small portion Foreign  Contains 15.589 foreign investors, including 1.741 24 Investment institutions and 13.848 Funds individuals up to 2012  Decreased by 70% compared to 2011 Types of securities I II III • In the bond market • In the stock market • In the derivative instrument market I In the bond market  Goverment bonds • Issued by a national government to support country development projects • Are usually denominated in the country's own currency • Refer to as risk-free bonds • Have no tax-paid but low rate of return • Issue on the primary market by bidding method  Yield movements I In the bond market (cont.)  Corporate bonds • Issued by a corporation • Have a higher risk of default in compare with government bonds • Have to pay taxes on the interest earned and also have a higher rate of return • In Vietnam, Total LCY corporate bonds outstanding rose 18.9% y-o-y to VND33 trillion in 2Q11 but fell 5.9% q-o-q (Table 2) II In the stock market  Common shares: • •  Preferred shares: • Nonvoting • Dividends • Voting privileges Ownership • Ownership Adjustable rate • • Right to information • Cumulative or non-cumulative •  Right to dividends Pre-emptive right • Convertible In Vietnam, stocks are sold and bought actively in secondary market  In Vietnam, the preferred share is essentially issued internally III In the derivative instrument market  Options contract • Financial contract between two parties, the buyers and the sellers • Give the option-buyer the right but not the obligation to buy or sell • The price established is known as exercise price, or strike price That is the price at the day which contract is able • Not be exercised if it is not in the option-buyer’s best interest • Divided into two types: Call option and Put option III In the derivative instrument market  Vanilla options Call option:   Give the option-buyers the right to buy Buyer gains if the price of the underlying assets higher than the exercise price Put option:  Give the option-buyer the right to sell  Buyer benefits if the price of the underlying assets is below the exercise price III In the derivative instrument market (cont.)  Swaps • Is used to exchange cash flows between party's financial instruments • Hedge the interest risk and exchange rate risk • Includes two types that are Interest Rate Swaps and Cross Currency Swaps ISSUING SECURITIES PRIVATE PLACEMENT METHODS OF ISSUEING Reasons: • Below standard of public placement • Small mobilized capital • Relationships maintenance • Staff motivation • Others Investors: Insurance companies, Pension funds, Investment banks, Mutual funds, etc IPO Initial Public Offering PUBLIC PLACEMENT Reasons: • Large mobilized capital • Company promotion • Copartner finding SPO Seasoned Public Offering Reference  http://www.asianbondsonline.adb.org/vietnam.php  http ://www.ssc.gov.vn/portal/page/portal/ubck/1096905?p_ page_id=1096905&pers_id=1108311&folder_id=& item_id=7173508&p_details=1  http:// www.ssc.gov.vn/portal/page/portal/ubck/gthieu/ttgdck  http://www.ssc.gov.vn/portal/page/portal/ubck/csdlcty/  http://www.tienphong.vn/Kinh-Te/562270/10-su-kien-chu ng-khoan-tieu-bieu-nam-2011-tpov.html  http://dvt.vn/2011122702063773p117c47/chung-khoan-na m-2011-thi-truong-lao-doc-niem-tin-sut-giam.htm  http://gafin.vn/20120202012630674p0c31/thang-1-ma-gi ao-dich-cap-moi-cho-nha-dau-tu-nuoc-ngoai-giam-70.ht m ...Outline Historical development of Securities in Vietnam Major participants in the Vietnamese capital market Types of securities traded on the market Issuing securities Historical Development... establishment of two Securities Trading Centers in Hanoi and Ho Chi Minh City under the management of the State Securities Commission (SSC) of Vietnam   The Stock Trading Center of Vietnam is also the official... Market capitalization from bonds: VND 81.5 trillion (2011) Total market capitalization of VND 602 trillion, accounting for 25% of GDP in 2011 Dealers Securities companies (103)  Operations: Securities