A Stock Market Battle Bares Vietnam’s North-South Divisions

Vietnam’s unique geography — two megacities divided by more than 1,700 kilometers and a tapered, less-developed hinterland, is both a challenge and an opportunity for businesses.

Source Getty

Why you should care

It's North versus South again in Vietnam, this time over financial markets.

In Vietnam, the regional differences between north and south are a topic of light banter that, if you dig too deep, can veer into taboo territory.

Northerners tend to take their food, including the staple pho soup, saltier than southerners, who like theirs sweeter. Residents of Ho Chi Minh City (also still widely known as Saigon) in the south will tell you they are quicker to smile than Hanoians in the north, whom they see as diligent but austere — po-faced even. Hanoians see Saigoneers as more entrepreneurial and cosmopolitan but too spendthrift, people who both work and play hard.

The north–south rivalry is likely to come into focus this month, as Communist lawmakers discuss a draft securities law that would merge the two cities’ equity markets into a single Vietnam Stock Exchange. One of the topics to be addressed is whether the new market will be in the capital of Hanoi (population 8 million), or Ho Chi Minh City, the business hub of 9–10 million.

It would be a bit silly to talk about moving the stock exchange in the U.S. from New York to D.C.

Huynh The Du, Fulbright University Vietnam

At stake is something bigger than whether the index arbiter MSCI upgrades Vietnam to “emerging market” status (it’s still classified as a frontier market). The question gets at the heart of tensions between north and south. “There is some latent resentment among southerners that the northerners are dominating the political system and unfairly exploiting the south,” says Le Hong Hiep, a fellow at the ISEAS-Yusof Ishak Institute in Singapore. “It’s not the language they use, but the resentment is there.”

In a country split by colonialism and war and reunited at great human cost — and where state censorship applies — regional tensions are a delicate topic, broached officially only in politically correct language, if at all.

Many Vietnamese believe (though it has never been officially confirmed) that top political jobs are divvied out regionally: Nguyen Phu Trong, the president and Communist Party secretary, comes from the north; Prime Minister Nguyen Xuan Phuc from the center; and Nguyen Thi Kim Ngan, chairperson of the national assembly and Vietnam’s most senior female politician, is from the south.

For business, Vietnam’s unique geography — two megacities divided by more than 1,700 kilometers and a tapered, less-developed hinterland, is both a challenge (for online retailers, for example) and an opportunity (for airlines plying the sixth-busiest flight route in the world). Trekking north to see the politicians in Hanoi and “touching your forelock in tribute,” as one Saigon businessman puts it, is a routine protocol for chief executives.

Logic would dictate that the planned VSE should be based in Ho Chi Minh City, whose stock exchange, with capitalization of about $150 billion, is more than 10 times the size of Hanoi’s. Most big companies, whether based in north or south, list on the Ho Chi Minh City Stock Exchange (HOSE). Ngan said in August that she thought the merged market should be “located in the place where there is the most vibrant and active market.” But a draft proposal on the VSE, drawn up by the ministry of finance (headed by a northerner), stipulates the merged exchange will be based in Hanoi.

When asked where the market should be, Luong Thi My Hanh, deputy CEO and chief investment officer of VietFund Management, the country’s biggest domestic asset manager, based in Ho Chi Minh City, laughs tactfully. “If we had a choice — if we had the right to decide — in Ho Chi Minh would be better,” she says. “It’s closer to the enterprises, to the companies.”

Other details to be decided include whether the Hanoi and Ho Chi Minh markets will be merged outright or operate separately and loosely as before under a holding company. Government policy tends to be something of a black box until final legislation and implementing decrees are handed down. In a possible indication of the sensitivities around the topic, the State Securities Commission did not comment.

Huynh The Du, of Ho Chi Minh City’s Fulbright University Vietnam, notes that while Hanoi has fewer residents than Ho Chi Minh City, it contributes less to state coffers and spends more. He is clear on where he thinks the market should go. “It would be a bit silly to talk about moving the stock exchange in the U.S. from New York to D.C.,” he says. “If you look at the size and nature of the market, it should be in Ho Chi Minh City.”

+
By John Reed

OZY partners with the U.K.'s Financial Times to bring you premium analysis and features. © The Financial Times Limited 2019.

OZYAround the World

Look beyond your bubble — and beyond your borders.