Patience required

13 February 2008 By Martin Hutchinson

The firm s joint venture there looks strategically sound. It gives it a premier position in a market that is growing rapidly. Nonetheless, Vietnam remains vulnerable to a credit crunch. Morgan could have to wait a long time for it to pay off.

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Morgan Stanley is acquiring 49% of a Vietnamese brokerage, Gateway Securities, the maximum permitted under Vietnamese law; it will provide brokerage services and invest its own money in Vietnamese listed companies. Morgan Stanley is the first Western bank to set up such a joint venture, but there are currently 100 brokerages operating in the country, which has only 275 listed firms. Morgan Stanley had attempted to set up a joint venture with the State Capital Investment Corporation, but the deal fell apart on local and competitor opposition.

Two Vietnamese companies have gone public this year, Vietcombank and Saigon Beer Alcohol beverage (Sabeco) raising a total of $1.2bn. The Ho Chi Minh Share Index closed February 13 at 817.86, down 30% from its March 2007 peak but up 165% on January 1, 2006.

Vietnam's gross domestic product (official exchange rate) was $53.6bn in 2007, and grew at 8.2%. Inflation in 2007 was 8.1%.

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