Citi Brings Securities Services to Vietnam

By Maria Trombly | Securities Industry News | March 20, 2006

Continuing its aggressive expansion in the Asia-Pacific region, Citigroup's global transaction services (GTS) unit has brought its custody and clearing services business to Vietnam. Anticipating significant growth, Citi had already offered securities trading and corporate cash management to Vietnam, but the addition of the new services as of Feb. 28 gives the New York banking company a stronger presence in the country's growing capital markets.

The receipt of custody and clearing license from the State Securities Commission (SSC), Vietnam's chief financial markets regulator, puts Citigroup's GTS on a par with the three other, Europe-based global custodians already in the country: HSBC, Deutsche Bank and Standard Chartered.

Currently, both local brokerage companies and foreign custodian banks offer custody services in Vietnam. Nguyen Van Dung, an official at the SSC's international relations department, says 13 local companies are in custody and clearing. Local investors are less averse to using one firm for both custody and investment banking services than are international investors, who usually prefer a foreign custodian, says Bui The Tan, director of securities business at Ho Chi Minh City-based Saigon Securities. Foreign custodian banks also provide services that local companies cannot: For example, Saigon Securities cannot handle foreign-exchange-related transactions without the help of HSBC, Bui says.

"We believe it is the right time to enter the market," says Margaret Dawson, Asia-Pacific head of Citigroup Securities Services. "We are seeing a significant increase in interest in Vietnam's capital market from our existing customer base, not just from Asia-Pacific but also from the U.S. and Europe." One reason is an explosion in the domestic stock market.

Vietnam Dairy Products Co. debuted on the stock market Jan. 19 with a total capitalization of over $500 million, which doubled the total capitalization of the entire market. With more initial public offerings in the pipeline, the market appears poised to continue expanding. The government has approved the listings of 11 state-owned enterprises, and VNA, the government-owned newswire, predicts that trading volumes will increase to 15 times the 2005 level by 2007.

To boost development in the domestic securities market, the government plans to open a central securities depository. A new investment law, due to come into effect this July, is expected to make the stock market more attractive to foreign investors by eliminating most distinctions between foreign and domestic shareholders. That's a requirement for World Trade Organization membership, and Deputy Prime Minister Vu Khoan, at a Feb. 15 press conference, said Vietnam expects to join the WTO by November this year if the negotiation process runs smoothly.

"When Vietnam becomes a member of the WTO, we believe we will be in a good position to support the needs of the investors," says Charly Madan, Citigroup's country officer for Vietnam.

Citigroup already has direct custody services in 15 countries in the region. In January, it introduced a direct custody service in Australia (Securities Industry News, Jan. 9). "We are one of the few custodian banks in Asia-Pacific to offer a combination of traditional global custody services with direct custody access to local markets," Madan notes.

Wendy Yu contributed to this report.