Investment Banking Services: A Crucial Link to Capital Markets
The development of investment banking services is a natural progression for Vietnam’s burgeoning capital markets. A representative from Stanley Brothers Securities JSC (SBSI) asserts that while the country’s stock market is still in its nascent stages, it has become an essential capital-raising avenue for businesses over the last decade.
As the stock market matures, investment banking activities are witnessing robust growth in terms of deal volume and value. This evolution is evident in the rising demands of enterprises and investors, compelling securities companies to continuously enhance their investment banking offerings. Such dynamics are already prevalent in financially advanced countries like those in Europe and North America.
Looking back, the period from 2008 onwards marked a boom in listing demands, fueled by the privatization of state-owned enterprises and the emergence of leading private companies. Consequently, investment banking services during this phase primarily revolved around privatization and public offering advisory, along with listing procedures for public companies.
Fast forward over a decade later (2019–2022), and Vietnam’s stock market has experienced a remarkable growth spurt. While the number of enterprises registering for public offerings and listings has increased, the more notable development has been the proliferation of equity issuances in various forms to individual and institutional investors.
This era also witnessed an explosion in corporate bond issuances. While corporate bonds initially gained traction around 2015, they were mostly private placements for banks or investment funds and did not entail substantial values. However, the years 2020–2022 marked a watershed moment for corporate bonds, witnessing a surge in both issuance volume and value. Moreover, these bonds started to be offered to the public, broadening their reach to individual investors.
The aforementioned trends clearly indicate that enterprises have begun to recognize the stock market (equities and bonds) as a viable and long-term capital-raising avenue, complementing the traditional bank financing channel.
“Consequently, investment banking activities in the market have also witnessed robust growth to meet the capital requirements of enterprises. Investment banking services at securities companies have expanded to include a wider range of products, such as M&A advisory, bond issuance advisory, and capital raising,” the SBSI representative remarked.
A Bridge to International Capital
Investment banking services serve as a vital bridge to international capital. Source: bulbapp.io
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Currently, regulations pertaining to listings, equity issuances, and bond offerings are continually being revised and upgraded to align with market dynamics. This regulatory evolution aims to establish a robust foundation for the development of a transparent and robust stock market, facilitated by vigilant supervision and guidance from the regulatory authorities.
Looking ahead, the listing and issuance activities of enterprises will likely face more stringent controls, underscoring the critical role of investment banking services. Securities companies offering these services must fortify themselves with adept human resources, robust infrastructure, and continuous professional development to meet the evolving demands of enterprises.
Market upgrade aspirations are not limited to the State Securities Commission (SSC) but are shared by the broader investment and financial sector. The implications of such an upgrade are far-reaching, with the most apparent outcome being an influx of international investment into Vietnam’s stock market.
According to the World Bank, if Vietnam achieves an upgrade by 2025, the country’s stock market could potentially attract approximately $25 billion in international capital by 2030. Undoubtedly, investment banking services will play a pivotal role in facilitating this capital influx.
The Need for More Large-Cap Listings
As per SBSI’s insights, Vietnam’s stock market has witnessed a substantial increase in market capitalization over the last decade, albeit with a noticeable disparity. The 30 largest listed companies, constituting the VN30 index, account for around 80% of the market’s total capitalization, amounting to roughly $140 billion.
Concurrently, regulations stipulate ownership limits for foreign investors in specific sectors and enterprises, and these are rigorously enforced. Many prominent enterprises already have significant foreign ownership stakes, such as BIDV (with KEB Hana Bank holding 15%), CTG (Tokyo Mitsubishi Bank at 20%), and VNM (F&N Dairy Investment at 18% and Platinum Victory at 10%), to name a few.
In anticipation of the market upgrade and the ensuing surge in international capital inflows, SBSI emphasizes the necessity of introducing more large-cap listings (such as the BSR listing on the Ho Chi Minh Stock Exchange) and encouraging existing listed companies to issue additional shares or bonds to raise capital from international institutions. “This presents a significant opportunity for the investment banking services segment within securities companies,” the SBSI representative concluded.
There is a need for more listings of large enterprises. Source: istockphoto.com
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