Country is luring overseas talent with its low living costs and growth prospects
After six years spent trading stocks in New York and Hong Kong, Patrick Mitchell decided he had had enough. The 30-year-old left the long hours and shrinking commissions behind in 2013 to join a firm that most of his colleagues had never heard of: VinaSecurities Joint-Stock in Ho Chi Minh City. He is now head of institutional sales at the company, living in a villa at least five times the size of his Hong Kong studio and helping to handle an influx of foreign investment that propelled Vietnam’s stock market to a third straight year of gains in 2014.
“I wanted to be a bigger fish in a smaller pond,” says Chicago-born Mitchell. “There were 100 other expat brokers running on the same hamster wheel I was in Hong Kong – making enough to survive in a high-velocity city, but not really saving any money.”
Mitchell is poised to get more company in Vietnam. At least five brokerages in the US$57.7 billion market are seeking to hire managers from outside the country, and five others have filled positions with foreigners in the past eight years. The push for overseas talent reflects the growing influence of international investors, who have added to their Vietnam positions for nine straight years and may get increased leeway to boost holdings as the government considers easing limits on foreign shareholders.
Brokers from Western countries tend to form better connections with overseas money managers because of their fluent English and shared culture, says Nguyen Lam Dung, chief executive of VPBank Securities, which hired a foreigner to replace its Vietnamese head of institutional sales about seven months ago. “Vietnam’s stock market is still very new compared to other markets. Although there are good local candidates, they usually lack experience. Candidates who have worked in more developed markets have competitive advantages.”
VNDirect Securities, Vietnam’s fourth-largest brokerage, has been looking for a foreigner to run its institutional sales for more than seven months as it seeks to boost the proportion of revenue from institutions to 20 per cent in the next two years from 5 per cent last year.
“We like foreign brokers because they are usually more professional and have more experience and exposure,” says Nguyen Hoang Giang, VNDirect’s Hanoi-based CEO. “Management of institutional portfolios has never been a simple matter.”
Vietnam’s benchmark VN Index has climbed 5.3 per cent this year, extending its gain since the end of 2011 to 63 per cent. That compares with a 26 per cent advance for the MSCI Frontier Markets Index and a 45 per cent increase for the MSCI World Index of developed-nation shares.
While Vietnam’s stock market has outperformed, volumes are still dwarfed by larger peers. The average daily value of shares traded on the Ho Chi Minh exchange was about 2.2 trillion dong (US$103 million) last year, versus US$8.9 billion in Hong Kong. Meanwhile, foreign inflows of US$136 million into Vietnam last year compared with US$3.76 billion for Indonesia and US$1.25 billion for the Philippines.
A smaller market also means lower compensation levels, which can be a challenge for firms seeking to hire brokers from overseas, according to Giang. Foreign candidates typically ask for salaries of about US$100,000 a year, more than double the rate for locals. “That’s too much,” says Giang, who offers stock options to help bridge the gap. “We are willing to pay high salaries, but they will not be as high as the foreign standards they may expect, because liquidity here in no way compares with other markets.”
Inflows into Vietnam will probably pick up as the country relaxes restrictions on foreign investment, said Dang Tran Hai Dang, the head of research at Maritime Bank Securities in Hanoi.
For Mitchell, lower compensation levels in Vietnam are more than offset by the country’s cheaper living costs and the growth prospects of its stock market.
While a night out in Hong Kong used to set Mitchell back by US$200, he spends closer to US$20 in Ho Chi Minh City. Hong Kong was ranked as the world’s third-most expensive city for expatriates in Mercer’s Worldwide Cost of Living Survey in July 2014, versus 131 for Hanoi. “The overall compensation is not comparable to the six-figure salaries in the more developed markets,” Mitchell says. “But anyone playing the frontiers is placing a bet on the future development of the country’s economy.”
Bloomberg
