VIETNAM’S STOCK EXCHANGE AND BANKS

HO CHI MINH CITY STOCK EXCHANGE

Vietnam opened a stock market in 2000. Based in Saigon and called the Ho Chi Minh City Securities Trading Center, it was set up with the help of the Stock Exchange of Thailand. Eager investors lined up the first day to buy stocks but by three months later enthusiasm had dimmed. Only four companies were listed and trading was very light. Investors were scared off by the tight reins the government kept on the market to discourage speculators and keep price from rising and falling too quickly.

Market value of publicly traded shares:$38.2 billion (31 December 2011 est.), country comparison to the world: 59; $26 billion (31 December 2011); $37 billion (31 December 2010 est.). [Source: Library of Congress]

Ho Chi Minh City Stock Exchange (HOSE), located in Ho Chi Minh City, is the largest stock exchange in Vietnam. Established in 2000 as the Ho Chi Minh City Securities Trading Center (HoSTC), it is an administrative agency of the State Securities Commission, along with the Hanoi Securities Trading Center. The stock exchange is located at 45-47 Ben Chuong Duong, District 1, Ho Chi Minh City, Vietnam. The current top executive of HSX, with the title of Deputy Chairman, is Mr. Tran Dac Sinh. [Source: Wikipedia +]

Initially named the Ho Chi Minh City Securities Trading Center (HoSTC), the HOSE was officially inaugurated on July 20, 2000, and trading commenced on July 28, 2000. Initially, two equity issues were listed, Refrigeration Electrical Engineering Joint Stock Corporation (REE) and Saigon Cable and Telecommunication Material Joint Stock Company (SACOM). In the beginning, an overall foreign ownership limit of 20 percent for equities and 40 percent for bonds was implemented. In July 2003, in a bid to improve liquidity, the government raised the foreign ownership limit for equities to 30 percent and totally removed the foreign ownership limit of a particular issuer’s bonds. +

In September 2005, Vietnam’s prime minister announced that the limit on foreign share ownership would rise from 30 percent to 49 percent. The value of stock market doubled to $1 billion in January 2006 when a milk company—Vietnam Dairy Products (Vinamilk)—debuted. The value of the boruse increased 50 percent when the first bank—saigon Thuong Tin Commercial Joint-Stock Bank, or sacombank—made its debut in July 2006.At the end of 2006, combined market capitalization of both Ho Chi Minh City Securities Trading Center and Hanoi Securities Trading Center is 14 billion US dollars, or 22.7 percent GDP of Vietnam. +

On 8 August 2007, HoSTC was renamed and upgraded to the Ho Chi Minh Stock Exchange. This is the largest stock exchange of Vietnam at the moment. As of July 2010, there were 247 companies listed on the HOSE with a market capitalisation of VND537.4 trillion ($28.28 billion). The exchange had 141 listings in January 2008, including 138 company stocks and three fund certificates, with a total market capitalization of 365.7 trillion dong ($23 billion). In 2011, the Vietnam stock market added 10 companies, nine more than last the previous year. Among the companies that debuted on the list were Petrovietnam Low Pressure Gas Distribution and DHG. Pharmaceutical. Vietnam limits foreign ownership of listed companies to 49 percent. As of January 2013, there were 308 listed companies on the HOSE. +

Functioning of the Ho Chi Minh City Stock Exchange

The Stock Trading Center of Vietnam is also the official mechanism through which new government bonds are issued, and it functions as the secondary market for a number of existing bond issues. All securities traded on the Stock Trading Center of Vietnam are denominated in Vietnamese dong (VND). Par value is standardized at VND10,000 for equities and VND100,000 for bonds. Trading is conducted daily with two matchings in a morning session, from 9 a.m. to 11 a.m. [Source: Wikipedia +]

Foreign participants on the Stock Trading Center of Vietnam must register through a custodian licensed to hold securities on behalf of foreigners. Once registered, a securities transaction code is issued to the foreign investor that will permit securities trading. As of 2006, there were thirteen licensed securities companies. Of these, nine have been licensed to conduct a full range of securities services including underwriting, brokerage, custody, research, portfolio management and trading. +

The State Securities Commission (SSC), a body established formally in 1996, is responsible for capital markets development, licensing of participants, and the issue and enforcement of regulations. A wide range of regulations, with significant input from multilateral bodies such as the International Finance Corporation, have been promulgated, including those dealing with such issues as insider trading, take-over trigger points and margin lending. To be listed, a company must have been profitable for at least 2 years, have a minimum capitalization of VND5b (approximately US$318,000), and have at least 50 shareholders who are not employees of the company, holding at least 20 percent of stake. Foreign invested joint venture companies are technically qualified to list, but to do so, they must be reorganized into joint stock company status. Companies intending to list must also submit to audit by an approved, independent auditing company. +

The mechanism of trading on the Stock Trading Center of Vietnam is via an automated order-matching system. The capacity of the system is 300,000 orders per day. Currently, trading limits of 7 percent (for bonds and equities) either side of the previous close apply (increased from a 5 percent band in January 2013). No price restrictions have been set for newly listed securities but price caps were applied in the case of the very first day of the market’s operations. +

Settlement is centralized through the Stock Trading Center of Vietnam using the Bank for Investment and Development of Vietnam (BIDV), a state-owned commercial bank. Several other domestic banks and securities companies have been authorized to accept custody of securities, with Citi's, Deutsche Bank’s, HSBC’s and Standard Chartered's Ho Chi Minh City branches currently the only banks providing custody services for foreign investors. Custody is based on a central depository, central registry book entry system. +

Ho Chi Minh City Stock Market Heats Up in 2006 and 2007

Vietnam’s stock market rose 144 percent in 2006, making it the world’s third best performer after Peru and Venezuela. According to the Saigon Times Daily, “The stock market recorded phenomenally exploding growth, with a string of new listings on the Hanoi and HCMC exchanges, and market capitalization skyrocketing from US$460 million (of 32 companies) at the beginning of the year to US$8.7 billion (of 92 companies) by December 26. However, share prices were greatly volatile. The VN-Index jumped from 304 points early in the year to more than 800 on December 20. The volatility was mainly driven by investor sentiment, not by the performance of businesses.” [Source: Saigon Times Daily, December 28, 2006]

AFP reported: “It's a weekday morning, and a stuffy stock trading floor in Vietnam's largest city is a beehive of activity, filled with people who should be somewhere else. Absentee office workers, students and housewives jostle for space with professional traders, shouting buy and sell orders with their eyes fixed on the red figures of the electronic board of the Saigon Securities brokerage. Vietnam is in the grip of stock fever, and everyone is getting into it. An army of giddy investors, many of them blissfully unconcerned with the more technical points of equity trading, are driving a bull market that last year outperformed every other bourse in Asia. "I don't know much about the companies," said 56-year-old housewife Nguyen Thi Huong, taking a punt in a securities company in Hanoi. "I make orders with the crowd. Sometimes I lose, sometimes I make money. It's a lot of fun." [Source: Agence France Presse, March 18, 2007 ||||]

Vietnam's main stock exchange, the HCMC Securities Trading Center, is only seven years old, but its growth has been stunning, from around 300 million dollars in early 2006 to a volume of over 16 billion dollars now. Last year the benchmark VN-Index rose nearly 145 percent, and so far this year it has gained over 47 percent. Seasoned market watchers and the International Monetary Fund have warned the market is overheating, forming a dangerous speculative bubble. Despite those concerns, the VN-Index bounced back from recent international jitters and a mid-week wobble to close last Friday at 1,109.76 points, up 4.15 percent for the day. The stocks frenzy is driven by optimism about the "mini-China" economy which last year grew by 8.2 percent and is set to gain more steam as Vietnam's January entry into the World Trade Organization boosts exports and investment. The market has gained momentum since global financial institutions such as Merrill Lynch and JP Morgan joined the fray and after US President George W. Bush last November visited the Ho Chi Minh City stock exchange. ||||

“As the communist government is plunging the country head-first into the free market era, state-owned enterprises are issuing stock to tap the country's large and idle savings pool for capital. For ordinary Vietnamese — known for their love of gambling on anything from football matches to buffalo races — this has equated a gold rush, fuelled by tales of fabulous overnight riches. "Now in Vietnam no business is more profitable than stock trading," said Tran Thanh, 45, who quit his job to become a market player and says he turned less than 10,000 dollars into over 300,000 dollars in two years. Market mania may rein on the official trading floors, but for many investors the real action is online, a trend that has transformed coffee shops and tea houses into centers of market trade and gossip. Many state companies have in recent years issued to their managers and staff unlisted shares which are now hotly traded in an unregulated market that dwarfs the official market. ||||

“About 700 companies are traded on this grey market compared to fewer than 200 on the official markets, said Le Nhi Nang, deputy director of the HCMC exchange. But in the absence of reliable balance sheets or a strong financial press, many traders act on gut feelings and rumours picked up from co-workers, at weddings or on a plethora of websites and chatrooms. "A vegetable seller might earn more money than an economics professor because her analysis is simple," said Thanh, himself a self-taught investor who has snubbed scores of new training courses on offer. Andy An Ho, director of Prudential Investment here, says many of the new "momentum or speculative investors" will "most likely know little about the companies they invest in and will rely heavily on their friends, neighbours, insiders and brokers for recommendation." Thanh says that he spends much of his time in a coffee shop with wireless Internet access to track real-time market news. "Online forums are also very useful, but we have to be careful because most of the information on them is not real," he said. Vietnam's regulators have been at pains to catch up with the stocks craze. ||||

Hanoi has backed off plans to impose capital controls, which had caused jitters among foreign investors, but has ordered stricter oversight and imposed fines for spreading false information and insider trading. Yet the grey market remains an unregulated world where knowing the right people with the right information is key to sorting out the winners from the losers. "Having internal information is very important," confided a 29-year-old state employee who asked not to be named. "Several of my colleagues, especially bosses, have become very, very rich recently. "Sometimes I have inside information, for example that a company is going to obtain a big contract with a foreign partner," he said. "I share that with one or two of my best friends so we can benefit together. "Thanks to trading stocks," he added with a smile, "I bought an apartment last month, and soon I will pick up my new Toyota." ||||

Vietnam IT Leader Makes Strong Debut on Stock Exchange

In 2006, AFP reported: "Vietnam's leading information technology group FPT has made an enthusiastic debut on Ho Chi Minh City's stock exchange, weeks after teaming up with several US software companies, the group said. A total of 60.8 million shares were traded, ending the day at 400,000 dong ($25) each, the company said in a statement. [Source: Agence France Presse, December 13, 2006 <<<]

The listing gave the company a market value of $1.5 billion, or about 20 percent of the value of the fledgling bourse in the former Saigon. FPT Corporation is the communist nation's market leader in mobile phone distribution, systems integration, software outsourcing and development, telecom, Internet and e-media content and computer assembly. Last year the company, which employs 5,000 people, reported revenue of more than $517 million, having booked an average of 70 percent annual growth over the past five years. "Our next target is listing on a regional stock trading center and to become a global corporation," said chief executive officer Truong Gia Binh. "We know that there will be many difficulties and obstacles." <<<

"FPT listed on the exchange just weeks after the group and Microsoft Corporation signed a three-year strategic alliance agreement. In October, FPT also said it had sold shares worth 36.5 million dollars to US chip giant Intel and private equity firm Texas Pacific Group. "We see FPT's announcement of its IPO as a positive step for the company to reach its goals of growing internationally and expanding into new lines of business," said Arvind Sodhani, president of Intel Capital. Some experts however said FPT was overpriced on a stock exchange that they saw as currently overheating. "The first day does not mean anything," said Kevin Snowball, director of PXP Vietnam Asset management, an investment fund specialized in Vietnam. "The shares are now extremely expensive and chances are they will go down. "It is a good company but not that good... It is not Microsoft." <<<

"Vietnam's stock market has witnessed spectacular growth in 2006, expanding from a total value of just over 500 million dollars in January to more than 7.4 billion dollars now. The IT market in Vietnam has been growing 20 percent annually and is now worth more than 800 million dollars. Vietnam, with a highly literate population of about 84 million, two-thirds of them aged under 30, is Southeast Asia's fastest growing personal computer market." <<<

Banks in Vietnam

The banking system in Vietnam has traditionally been a state monopoly that only lent money to state-owned companies. These companies often wasted they money that was lent to them leaving the banks saddled with bad loans. In 2007, Vietnamese state-owned banks accounted for 70 percent of total credit in the country.

Vietnam’s banks suffer from low public confidence, regulatory and managerial weakness, high levels of non-performing loans (NPL), non-compliance with the Basel capital standards, and the absence of international auditing. Since 1992 Vietnam’s banking system has consisted of a combination of state-owned, joint-stock, joint-venture, and foreign banks, but the state-owned commercial banks predominate, and they suffer from high levels of NPL, most of them to state-owned enterprises. Consequently, in September 2005 Vietnam decided to equitize all five state-owned banks—a change from previous plans to equitize only two of them. In addition, Vietnam plans to boost the transparency of its financial system by establishing a credit-rating agency and performance standards for joint-stock banks. Large foreign banks are balancing their strong interest in serving multinationals in Vietnam and frustration with continuing restrictions on their activities. Although Vietnam is a cash-based society, 300 to 400 automated teller machines (ATMs) have been installed, and about 350,000 debit cards are in circulation. [Source: Library of Congress, 2005]

Central bank discount rate: 9 percent (31 December 2012), country comparison to the world: 11; 15 percent (31 December 2011). Commercial bank prime lending rate: 15 percent (31 December 2012 est.), country comparison to the world: 30; 16.96 percent (31 December 2011 est.).

Banking in Vietnam the 2010s

The State Bank of Vietnam reduced the maximum deposit rate several times in 2012 to 8 per cent in the hope of bringing down lending rates. But the spread between deposit and lending rates remains wide, with bank loans typically carrying an interest rate of 14 to 15 per cent. [Source: Bruce Gale, The Straits Times, April 24, 2013]

Bankers reject the idea that their reluctance to lend is the cause of the downturn. Speaking to Thanh Nien News last month, Truong Van Phuoc, general director of Eximbank, said his institution had been proactively offering companies rates of between 11 and 12 per cent, but without success. Eximbank is the second-largest commercial bank in the country.

Local corporations, he believed, saw no reason to borrow when the economy was slowing. That said, bankers admit privately that, because of the fear of bad debts, only customers with a good credit rating can get preferential rates. Saddled with a high level of non-performing loans (NPLs) as a result of years of reckless lending, banks are anxious to preserve capital.

Bad Loans and Indebted Banks in Vietnam

In December 2012, AFP reported: “After a decade of rapid and chaotic bank liberalisation, Vietnam now has 42 domestic banks. Many are overloaded with toxic debt, much of it held by inefficient and poorly-managed state-owned companies. The government has renewed a high-profile anti-corruption drive, focusing on the heads of failing state enterprises and wealthy banking tycoons to ease rising public dissatisfaction over the slowing economy. It was forced to take action after a fraud scandal broke at Asia Commercial Bank, triggering a run on deposits and forcing Vietnam's central bank to provide emergency liquidity to the institution. Analysts stress the need to woo more foreign players into the nation's crisis-hit banking sector to inject new cash and greater expertise. In September, Moody's downgraded Vietnam's credit rating from "B1" to "B2", citing weaknesses in the banking system that may hit medium-term growth, and "an elevated risk" of a costly government banking bailout. [Source: AFP, December 27, 2012]

Vietnamese banks are saddled with a high level of non-performing loans (NPLs) In February 2013, the government said NPLs stood at just 6 per cent. But many economists insist that the real level of bad debt is much higher. Repeated delays in the formation of a proposed debt asset management company---the National Financial and Monetary Policy Advisory Council--- to deal with the problem has not inspired confidence in Hanoi's determination to do something about the situation. [Source: Bruce Gale, The Straits Times, April 24, 2013]

Ratings agency Fitch has estimated the cost of recapitalising the banks to be equal to as much as 10 per cent of the country's GDP. Citing non-performing loan levels, Moody's Investors Service last September cut the nation's credit rating by one level to B2, five steps below investment grade.

Foreign Banks in Vietnam

In February 2013, Cynthia Koons and Isabella Steger wrote in the Wall Street Journal, “Vietnam could use foreign investors’ help fixing a banking system that is hobbling its economy, but slowing growth, bad loans and a lack of transparency make for a challenging sales pitch. The government may allow foreign investors to take positions as big as 49 percent in state-owned banks, or even majority stakes conditional upon later divestment, people familiar with the proposed plans have told The Wall Street Journal. Selling those stakes would help Vietnam attract the foreign capital and expertise it needs, according to Ivan Tan, a director at Standard & Poor’s. Foreign banks are now allowed to own 20 percent of a Vietnamese bank as an individual investor, or 30 percent with a partner. The government owns a majority—in some cases, 100 percent—of all five state banks. [Source: Cynthia Koons and Isabella Steger, Wall Street Journal, February 13, 2013]

In September 2008, Associated Press reported: “HSBC and Standard Chartered Bank have won approval from the State Bank of Vietnam to become the first foreign banks to open their wholly owned entities in the communist country, the bank said. The licenses were handed over to the two banks in the presence of British Prince Andrew, who was on a five-day visit to the country, the state bank said on its Web site. HSBC Vietnam, to be headquartered in southern commercial hub of Ho Chi Minh City, will have legal capital of US$183 million while Standard Chartered's unit, to be based in Hanoi, will have legal capital of US$61 million, it said. "HSBC and Standard Chartered will be the first foreign banks to open wholly owned units in Vietnam,'' the state bank said "This is a clear signal reflecting Vietnam's strong commitments to WTO.'' [Source: AP, September 9, 2008]

Under commitments to join World Trade Organization last year, Vietnam promised to open its service sector to foreign competitors. "We aim to start operating through our new local entity as early as possible,'' Thomas Tobin, CEO of HSBC in Vietnam said in a statement. "We hope to become the first foreign bank to operate a fully owned local entity in the fast-growing Vietnamese banking sector and look forward to opening a new chapter in HSBC's history in Vietnam,'' he said. HSBC and Standard Chartered have been running branches in Vietnam for years and both have bought stakes in local banks

In December 2012, AFP reported: “Japan's biggest bank Mitsubishi UFJ has bought a 20 percent stake worth $US743 million in state-owned VietinBank, the largest merger or acquisition deal ever in Vietnam's banking sector. The deal aims to boost "support for Japanese companies operating in Vietnam", Bank of Tokyo-Mitsubishi UFJ president Nobuyuki Hirano said on Thursday. The bank also aims to tap Southeast Asian markets after seeing its profits tumble this year. [Source: AFP, December 27, 2012]

VietinBank, or Vietnam Joint Stock Commercial Bank for Industry and Trade, said the State Bank of Vietnam will still own the majority of its shares but described the deal as "the largest-ever M&A (mergers and acquisitions) transaction" in the country's banking sector. It is also "the most important investment by a foreign partner in the banking sector in Vietnam", Le Tham Duong, a professor at the Banking University in Ho Chi Minh-City, told AFP. Japanese investment in Vietnam has increased in recent years, with another Japanese bank, Mizuho Financial Group Inc, buying a 15 percent stake in Vietcombank, Vietnam's largest listed bank by market value, for nearly $US570 million in September 2011.

In February 2013, Cynthia Koons and Isabella Steger wrote in the Wall Street Journal, “Japanese banks stand out as active, even counter-cyclical investors in Vietnam’s banking sector, providing an important source of capital for banks there, where lending growth remains robust compared with Japan. Mitsubishi UFJ Financial Group Inc., for example, took a 20 percent stake in Hanoi-based Vietnam Joint Stock Commercial Bank for Industry and Trade (VietinBank), one of Vietnam’s largest banks by market share, at the end of last year for $741 million Mizuho Financial Group Inc. bought a 15 percent stake in the Vietnam Bank for Foreign Trade, the country’s largest listed bank by market value, for around $560 million in September 2011. And Sumitomo Mitsui Financial Group Inc., which bought a 15 percent stake in Vietnam Import-Export Commercial Joint Stock Bank for $225 million in 2007, is currently in talks about buying a stake in Saigon Thuong Tin Commercial Joint Stock Bank, known as Sacombank. "Japanese banks are much more long-term, and tolerant of minority positions and are happy to sit on small stakes," said Joe Gallagher, co-head of Asian-Pacific mergers and acquisitions at Credit Suisse AG. [Source: Cynthia Koons and Isabella Steger, Wall Street Journal, February 13, 2013 />/]

“Japanese banks also have somewhat unique objectives. Their interest in Vietnam is partly motivated by their desire to provide loans to Japanese corporations operating there, especially to manufacturers, many of whom are looking to diversify away from China, and that requires taking a minority stake in a Vietnamese bank, an executive at one of Japan’s biggest banks said.

Banking in Vietnam Loses Appeal

In February 2013, Cynthia Koons and Isabella Steger wrote in the Wall Street Journal, “Not too many years ago, foreign banks might have been eager to buy into Vietnam HSBC Holdings PLC, Société Générale SA and Australia & New Zealand Banking Group Ltd. all invested in the country’s banks prior to the global financial crisis, although ANZ sold its stake in January 2012 as it shifted its strategy to focus on its own Vietnam operation. [Source: Cynthia Koons and Isabella Steger, Wall Street Journal, February 13, 2013 />/]

“Now, although Japanese lenders have recently bought into the sector, Vietnam’s banks look less inviting. The economy has slowed from an average of 7 percent annual growth since the early 1990s, according to HSBC, to 5 percent last year, according to a government estimate. Property prices have slumped and bad loans have piled up, making banks reluctant to lend and further weighing on economic growth. Annual credit growth, which exceeded 20 percent from 2006 through 2010, slumped to 8.9 percent last year, S&P says. />/

“Making matters worse, because of a lack of transparency and weak accounting practices, no one is sure how many bad loans are in the system. State Bank of Vietnam, the country’s central bank, said in November that the ratio of bad debt to total loans was 8.82 percent as of the end of September, up from 6 percent at the end of 2011. But Moody’s Investors Service said in a report in October that nonperforming loans totaled at least 10 percent of outstanding loans late last year, and could be much higher. Fitch Ratings Co. analysts last year put the figure as high as 15 percent. />/

S&P’s Mr. Tan said foreign capital is needed to recapitalize larger, state-owned banks, but "the appeal of the Vietnamese banking system has diminished somewhat." To be sure, the government has acknowledged the problem and is taking steps to fix it. For one, it is cracking down on mismanagement at state-owned banks, arresting bank executives and at least one prominent businessman in connection with allegations of improper lending. Last March, Prime Minister Nguyen Tan Dung approved a three-year restructuring plan for the banking sector, including the consolidation of smaller lenders and the creation of a "bad bank" to buy distressed assets. />/

Government Says It Won’t Help Failing Banks

Vietnam’s banking system faces a high level of bad debt in part because of loans to state companies, according to a government report. In June 2011, Reuters reported: “The Vietnamese government said it will not rescue failing banks, Deputy Prime Minister Nguyen Sinh Hung said. In the banking sector, some economists have expressed concern about the future of smaller, less solvent banks as well as those with heavy loads of non-performing loans from inefficient state-owned enterprises.[Source: Reuters, June 9, 2011 ~~]

“The International Monetary Fund said the government needed to address concerns about vulnerabilities in the financial system as it seeks to stabilise the economy. The Fund recommended tighter supervision of the banking sector and improving governance and financial discipline in corporations. ~~

Hung said the government would not bail out banks. "The policy, as we can see it now, is that if financial institutions are in difficulty they will be merged. There is no longer a case where the state will stand out to subsidise financial institutions on the edge of bankruptcy," Hung said. In addition, he said, the government would reduce the number of stock brokerages and banks. "It's time for good quality banks," he said at a mid-year meeting with foreign donors. ~~

Bonds in Vietnam

In 2005, Bloomberg reported: “Vietnam views the sale of foreign bonds as a new channel for raising capital, Deputy Prime Minister Vu Khoan said at the opening of the meeting. Vietnam used a $750 million global bond sale in October to finance its state-owned shipbuilding industry, the World Bank told the meeting. That use of the money worried the International Monetary Fund which warned the conference of the "large overall size and uncertain quality" of planned investments by some other state-owned industries. [Source: Jason Folkmanis, Bloomberg News, December 7, 2005 >+<]

"Planned further issues of government-guaranteed bonds by major state-owned enterprises could increase external vulnerability," the IMF said, urging the government to reconsider its bond issuance plans. Vietnamese banks have reduced the overall pace of loan growth by slowing credit to state-owned companies to a 28 percent annual rate in June from 36 percent for all of 2004, according to World Bank figures. >+<

Insurance Becoming Big Business in Vietnam

In July 2006, Thanh Nien reported: “Expansion is Vietnam’s insurance industry has inspired major insurance providers to working together in developing a more efficient business system as there is still room for insurance to grow in Vietnam. The leading insurance companies in Vietnam have joined hands to set up a management software program worth VND500 million (US$31,250) that will help them better control their agent network system. [Source: T.Bao, Thanh Nien, July 4, 2006 *-*]

“Vietnamese Bao Viet Life Insurance Company and Bao Minh CMG, ACE Life and AIA of the US, the UK’s Prudential, and Taiwanese Manulife expect the software program will allow them to screen insurance agents suspected of defrauding clients, unhealthy competition or other trade frauds. Vietnam’s insurance market has been growing 30 percent annually on average for the last few years, proving irresistible to not only foreign insurers abut also insurance brokers. *-*

“The country now has 16 non-life insurers, eight life insurance companies, and one reinsurance company with total insurance assets of VND30.657 trillion (US$1.9 billion). In addition to the several foreign insurers doing business in Vietnam, three major insurance brokers have also set up shop in the country. Insurance brokers, though new to Vietnam, play a critical role in the insurance business as they provide consultation to insurance buyers regarding policies, conditions, premiums, insurers, as well as facilitating the negotiation and signing of insurance contracts. *-*

“But with the recent insurance expansion, market analysts still believe the market is still largely untapped and there is room for growth and development. Though life insurance might remain beyond the financial reach of a large number of people, some foreign insurers believe 15-20 percent of the population – or 11-15.8 million people – are potential customers. Only 7 percent of the population now has life insurance compared to 15 percent in neighboring Thailand. *-*

On Prudential's Vietnam operations, Caroline Muspratt wrote in The Telegraph, “ In Vietnam, the Pru has more branches than the largest private bank, and Prudence - the female face that forms the company's logo - can be found everywhere. "You go into the street and ask people about insurance and they say Prudential." Huynh Thanh Phong, chief executive of Prudential's Vietnam business, It has become such a well-recognised image that other less scrupulous companies have copied the logo to use on products including spectacles and handbags.[Source: Caroline Muspratt, The Telegraph, May 8, 2006]

In Vietnam, the average age is just 26, after a population boom at the end of the war in 1975. This means a young, educated and increasingly affluent population - ideal for insurers. The company targets its advertising carefully and sponsors several education initiatives in schools. Prudential has also traded on its reputation as a 150-year-old western business with a solid financial background.

Image Sources:

Text Sources: New York Times, Washington Post, Los Angeles Times, Times of London, Lonely Planet Guides, Library of Congress, Vietnamtourism. com, Vietnam National Administration of Tourism, CIA World Factbook, Compton’s Encyclopedia, The Guardian, National Geographic, Smithsonian magazine, The New Yorker, Time, Newsweek, Reuters, AP, AFP, Wall Street Journal, The Atlantic Monthly, The Economist, Global Viewpoint (Christian Science Monitor), Foreign Policy, Wikipedia, BBC, CNN, Fox News and various websites, books and other publications identified in the text.

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© 2008 Jeffrey Hays

Last updated May 2014

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