Development Orientation of Vietnam Stock Market

Any securities company can do it when the capital scale of securities companies is still very low.

 Management capacity and skills, especially risk management, are still weak. Because this is a completely new field for Vietnam, managers of securities companies generally do not have experience in managing operations as well as controlling risks in securities trading. Managers of securities companies work and gain experience, leading to instability and lack of professionalism.

 The number of employees is both insufficient in quantity and weak in expertise. The current staff of securities companies cannot meet the requirements of the job as well as the requirements of customers. One employee takes on too many tasks and therefore cannot do a good job. The number of employees in securities companies certified by the State Securities Commission is only about 300 employees, this number is too small for securities companies when the workload requires a much larger number of employees.

On the other hand, the training and certification of the State Securities Commission is also facing overload due to the great demand from securities companies and society while there is only one organization that is allowed to train and issue certificates. That has led to securities companies only being able to meet the minimum requirements for job positions as prescribed by law, while most of the remaining employees do not have or have but do not have enough of the 3 practice certificates prescribed by the State Securities Commission.

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The training content for granting practice certificates to employees working in securities companies is not specialized according to job position or profession. Therefore, if having enough practice certificates, employees of securities companies can work in any professional department. Therefore, the quality of the staff is somewhat affected and the low professionalism leads to the quality of service provision being affected.

 The organizational structure is not reasonable. The arrangement of departments, although in the direction of professional expertise, is still not scientific. One department still performs many tasks at the same time. There is no close coordination between departments. This leads to low professionalism in operations and overload of employees at work.

The internal control department in some securities companies has not been established yet. In existing securities companies, this department has not yet fully promoted its role in supervising the activities of the securities companies, leading to some securities companies still violating the operating principles of the stock market, affecting the interests of investors.

 Lack of initiative and dynamism of the self-trading department in securities companiesbelonging to the bank or parent company. Besides the advantage of support from the parent company, the parent bank, the overly strict control and inspection of the owner agency has somewhat limited the boldness and dynamism of the self-trading department in securities companies. For example, with the capital provided for self-trading activities, securities companies are not allowed to have full autonomy in investing and diversifying risks, but the investment in any type must follow a certain ratio that the parent bank has allowed. The issue of decentralization of business management in the self-trading activities of securities companies also has many shortcomings.

 Marketing and advertising activities have not been focused on. Securities companies still take this issue lightly and have not yet advertised or marketed the services they provide to each customer segment. Securities companies only generally introduce their activities and services on the company's floor or on the company's website, but the introduction is still very sketchy.

 Lack of long-term business strategy. Securities companies have not yet developed a long-term business strategy, only stopping at setting out short-term (annual) operating plans. Therefore, securities companies have not yet had measures to develop

sustainable development. At the same time, most securities companies have not paid attention to building processes for each specific business activity. That is one of the reasons leading to low professionalism in securities companies today.

* Objective reasons

 The system of legal documents is inconsistent and ineffective.

+ The legal effect of specialized legal regulations directly regulating the activities of securities companies is not high. The highest legal document in the field of securities and the securities market in general and securities companies in particular has only stopped at the Decree level (as of the end of 2006). This has limited the ability to expand the activities of securities companies.

+ Legal documents guiding the implementation of operations are not complete, the updating of legal documents to adjust and guide newly arising operations is still weak. The regulations in legal documents have somewhat limited the ability to provide services of securities companies.

+ The regulation on the fee for underwriting activities that a securities company is allowed to collect is 3%, this fee is too low while this activity contains many risks for the securities company when performing underwriting. That is one of the reasons why the underwriting activities of securities companies are still limited.

+ The selection of an organization to provide consultancy on equitization of state-owned enterprises by the Ministry in charge of that enterprise has limited the initiative of securities companies in finding customers.

+ According to current regulations, investors (including securities companies) are not allowed to buy and sell the same type of securities in the same trading session, which inadvertently does not allow securities companies to perform the role of market makers. Because as market makers, securities companies must simultaneously post the price they are willing to buy and sell for a type of security.

 The stock market is not yet developed. Whether or not the activities of securities companies expand depends largely on the development of the stock market. In Vietnam, the stock market is still in the early stages of development, so the elements that make up the market such as goods, investors, support organizations, etc. are still lacking. Therefore, securities companies face many difficulties in implementing business activities in general and each specific business activity faces its own difficulties.

 Causes from businesses and investors.

+ Enterprises’ understanding of the services provided by securities companies such as: services related to securities issuance (issuance consultancy, BLPH) to mobilize capital for production, capital restructuring services, financial analysis, shareholder book management services, etc. is not complete. Therefore, the use of securities companies’ services by enterprises is still limited.

+ Enterprises often violate information disclosure regulations such as time, information disclosure content, information about related transactions... Therefore, it has led to certain difficulties in the operations of securities companies.

+ Investors’ awareness of securities investment is not high, so the demand for services provided by securities companies is still low. Investors still prefer to choose the type of securities and the time to buy and sell securities themselves rather than entrusting capital to securities companies. Moreover, investors do not fully trust, feel secure and appreciate the advice from securities companies. That has made the securities investment advisory and investment management activities of securities companies difficult.

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Thus, in this chapter, the activities of securities companies have been analyzed through different time points of the Vietnamese stock market. Those time points are marked by two changes in the highest legal documents regulating the market, the first time at the end of 2003 when Decree 144/2003/ND-CP replaced Decree 48/1998/ND-CP; the second time at the beginning of 2007 when the Securities Law officially took effect.

During the operation process, some securities companies have gradually affirmed their position in each specific activity through data on the company's operating results in the years, specifically:

- In brokerage activities, the companies with strengths are BVSC, VCBS, SSI, ARSC, in which BVSC and SSI are strong in stock brokerage while ARSC and VCBS are strong in bond brokerage.

- Proprietary trading activities, led by ARSC and VCBS in bond trading activities; ACBS, SSI and BVSC lead in stock trading activities.

- BLPH activities mainly focus on 4 securities companies belonging to the State-owned commercial banks and BVSC.

- Financial consulting and financial services, BVSC, ACBS, SSI. Other activities have not been focused on by securities companies. Among the securities companies established later, some companies have emerged with effective operations (mainly in brokerage activities) such as VNdirect, SBS, ABS, FPTS, KLS...

Therefore, it can be seen that in the market there has been a separation between the top securities companies and the remaining securities companies. The securities companies that have created prestige in the Vietnamese stock market in recent times include VCBS, SSI, BVSC, ARSC, ACBS and BSC.

However, for securities companies to develop further in the future, there must be synchronous solutions from the securities companies as well as the necessary conditions to implement those solutions. This issue will be mentioned in chapter 3 of the thesis.

CHAPTER 3: SOLUTIONS TO DEVELOP SECURITIES COMPANY ACTIVITIES IN VIETNAM

3.1. Development orientation of securities companies in Vietnam

3.1.1. Orientation for development of Vietnam's stock market

The strategy for developing the Vietnamese stock market from now until 2010 has been issued by the Government in Decision 128/2007/QD-TTg dated August 2, 2007 of the Prime Minister on approving the project for developing the Vietnamese capital market until 2010 and vision to 2020, (this decision replaces Decision No. 163/2003/QD-TTg dated August 5, 2003 of the Prime Minister approving the strategy for developing the Vietnamese stock market until 2010), specifically:

- General objectives:

Rapidly, synchronously and steadily develop the Vietnamese capital market, in which the stock market plays a leading role; gradually turn the capital market into an important component of the financial market, contributing effectively to mobilizing capital for investment, development and economic reform; ensure publicity, transparency, maintain order, safety and efficiency, strengthen market management and supervision; protect the legitimate rights and interests of investors; gradually improve competitiveness and proactively integrate into the international financial market. Strive for the Vietnamese capital market to develop to the same level as markets in other countries in the region by 2020. [20]

- Specific goal: " Develop a diverse capital market to meet the capital mobilization and investment needs of all economic entities. Strive for the stock market capitalization value to reach 50% of GDP by 2010 and 70% of GDP by 2020". [20]

To achieve the above goals, it is necessary to:

1. Form and develop a synchronous structure of the capital market, in which the stock market plays an important role, ensuring the mobilization and effective allocation of investment capital for economic growth; closely coordinate with the monetary market in curbing inflation and stabilizing currency; successfully integrate with the international capital market.

2. Build and develop a capital market with a reasonable structure, ensure transparent market operations, and enhance competitiveness for organizations and individuals participating in market activities.

3. Organize the operation of the capital market to operate safely, effectively and healthily; ensure national financial security.

Especially in the short term:

a. Develop scale, improve quality and diversify products to meet market demand:

+ Expand the scale and diversify the types of bonds, methods of issuing government bonds, local government bonds, and corporate bonds on the capital market; develop corporate convertible bonds and project bonds to invest in key national infrastructure projects;

+ Promote the equitization program of state-owned enterprises, corporations, economic groups and state-owned commercial banks, linking equitization with listing on the stock market; expand the issuance of new shares to mobilize capital on the market. For equitized enterprises that meet the conditions, they must be listed; at the same time, review and implement the sale of the State's capital in the

State-owned enterprises do not need to hold controlling shares or do not need to hold shares. Convert foreign-invested enterprises into joint stock companies and list and trade on the stock market;

+ Develop derivative securities such as: call options, put options; futures contracts; term contracts; linked products (securities - insurance, securities - credit, savings - securities...); products from securitization of assets and debts...

b. Gradually complete the structure of the capital market to ensure the State's management and supervision capabilities:

+ Separate the bond market from the stock market to form a specialized bond market. Gradually research and develop a futures trading market for derivative instruments, a securitization market for medium and long-term bank loans, etc.;

+ Develop the stock market at many levels to meet the needs of issuing, listing and trading shares of many types of enterprises and ensure the State's management and supervision capacity in the direction of separating the centralized trading market, the decentralized trading market (OTC), the market for registering issuance and trading for small and medium enterprises;

+ Synchronously upgrade the technical infrastructure of the market, ensuring the ability to connect with markets in countries in the region;

+ Organize a decentralized securities trading market (OTC) in a managed manner through solutions: carry out registration and centralized depository for joint stock companies that meet the conditions under the provisions of the Securities Law; study the trading mechanism for securities that do not meet the conditions for listing according to the agreement model through companies.

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