Developing Brokerage Activities at MB Securities Joint Stock Company (MBS)

Developing Brokerage Activities at MB Securities Joint Stock Company (MBS)
CONTENTS
CONTENTS...........................................................................................................................................1 PREFACE..............................................................................................................................................3 CHAPTER I: INTRODUCTION...........................................................................................................4 1. Company Introduction.................................................................................................................4 1.1 Formation and development......................................................................4 2. Organizational personnel structure..............................................................6 2.1. Organizational structure............................................................................6 2.2. Personnel structure and qualification........................................................8 3. Services supplied by MBS............................................................................................................8 3.1. Individual Clients.......................................................................................8 3.1.1. Securities services.................................................................................8 3.1.2. Research................................................................................................9 3.1.3. Foreign Individual Clients.....................................................................10 3.2. Institutional Clients.................................................................................10 3.2.1. Institutional Client Services..................................................................10 3.2.2. Research (the same details with research services for individual clients)........................................................................................................... 11 3.2.3. Investment banking.............................................................................11 CHAPTER II: CURRENT CONDITION.............................................................................................13 1. Quantity of Customer Accounts opened in MBS.....................................................................13 2. Ratio of brokerage revenues over Sales....................................................................................14 3. Market share of brokerage activities........................................................................................16 CHAPTER III: EVALUATION AND SOLUTIONS...........................................................................17 1. Evaluating brokerage activities of MBS...................................................................................17 1.1. Achievements.........................................................................................17 1.2. Limitations and causes............................................................................17 1.2.1. Limitations...........................................................................................17 1.2.2. Causes................................................................................................. 17 1.2.2.1. Objective causes...............................................................................17 Tran Thi Hong Phuong ID: 0953040070
Developing Brokerage Activities at MB Securities Joint Stock Company (MBS) 1.2.2.2. Subjective causes..............................................................................18 2. Solutions for developing brokerage activities in MBS.............................................................19 2.1. Theoretical basis for developing brokerage activities in MBS.................19 2.1.1. Vietnam stock market developing orientation.....................................19 2.1.2. MBSs developing orientation...............................................................20 2.1.2.1. Assessing achievements and weak-points .......................................20 2.1.2.2. Main objectives and tasks orientation in 2012.................................21 2.1.3. Solutions for improving efficiency of brokerage activities in MBS........22 2.1.3.2. Improve brokers quality...................................................................24 2.1.3.3. Improve services and products quality.............................................25 2.1.3.5. Other solutions..................................................................................26 3. Proposals.....................................................................................................................................26 3.1. Proposals toward management authorities.............................................26 3.2. Proposals towards MB.............................................................................26 3.3. Proposals towards MBS...........................................................................26 CONCLUSION....................................................................................................................................27 REFERENCES.....................................................................................................................................28
Tran Thi Hong Phuong ID: 0953040070
PREFACE Going through more than ten years of evolvement, Vietnam stock market somehow has achieved some remarkable developments with the increasing number of securities company and clear legal framework for Securities Act Besides, there still exist many difficulties coming from inflation scenario, low investment, high interest rate that harden the evolvement of stock market and the whole economy. Notwithstanding, stock market will continue to be an effective channel to mobilize mid and long-term fund together with the credit market. As stock market is a barometer reflecting the health of the macroeconomics, well-functioning macroeconomics will help stock market to stabilize, grow and capitalize funds for the economy. While the Government is trying hard to perform effectively, strictly but flexibly fiscal and monetary policies to stabilize the economy, control inflation and execute wholly economic restructure, the development and restructure of the stock market are of essence for that mission to be completed. Solutions are various to increase the efficiency of stock market, yet the first and most important operation to be concerned should be securities brokerage activity. Brokerage is the basic operation of every securities company and also the most directly effective tool to attract investors and funds. Thus, how to improve brokerage activities is always the first objective for revenues increase of each securities company. For all the above reasons, I decided to get to know more about brokerage effectiveness and do a small research on the topic Developing brokerage activities at MB Securities Joint Stock Company (MBS) to understand better this issue when I had the chance to take an internship at MB Securities Joint Stock Companys head office. I would like to express my appreciation to all the lectures of Finance and Banking Faculty at Hanoi Foreign Trade University for teaching and introducing me to the field of Finance and Banking. Especially, I would like to thank Mrs. Kim Huong Trang for supporting and supervising me to conduct the internship as well as choosing topic and writing this report.
CHAPTER I: INTRODUCTION 1. Company Introduction Founded in 2000 by Military Commercial Joint Stock Bank (MB), MB Securities (formerly known as Thang Long Securities) was one of the first five securities companies in Vietnam. After ten years of development, MBS has grown into one of the premier brokerage houses in the country. Since 2009, MBS has become the number one brokerage house in terms of market share on both securities exchanges, the HNX and HSX. Leveraging the synergies as a key member of the MB Group, MBS has been able to grow quickly its operation scale and level of activities. Since its founding, the chartered capital has grown from VND9 bn to VND1.200 bn. From the initial offering of only brokerage services and investment advisory, MBS has expanded its service lines in recent years to include brokerage, investment advisory, depository, securities underwriting, investment banking and client facilitation trade. The firms network has expanded from its original head office in Hanoi to multiple branches and trading centers in Vietnams major cities. Acknowledging that employee skill provides the underlying basic for competitiveness, MBS is constantly striving to attract and cultivate the most talented individuals in the securities industry. At MBS, professionalism, ethics and market expertise are emphasized in order to provide maximum value for the companys clients and shareholders. Vision - MBS strives to become the leading investment bank in Vietnam, operating to the high standards of professionalism. Mission - MBSs mission is to bring reliable support to clients, shareholders and employees through building a dynamic and dedicated talent pool, a trust and prudent corporate culture and investment in state-of-the-art technology. Core values - MBS is committed to building an operating environment of trust, respect, professionalism, efficiency and prudence. This corporate culture is applied consistently to dealing with each client, business partner and employee in order to generate premium returns to clients. Competitive advantages Leader in the investment industry in Vietnam; Well trained and professional talent pool with international experiences; Flexible and diversified financing products; State-of-the-art technology platform; High level of business ethics and professionalism; and Low cost structure. 1.1 Formation and development Table I.1.1.1. : Companys profile MB SECURITIES JOINT STOCK Company Name: COMPANY
International Transaction Name: Operation License : Charter Capital: Head Office: Tel: Fax: Website: Email:
MBS (approved from May, 2012) Decision No. 98/UBCK-GPCCTCK issued by State Securities Committee 1,200,000,000,000 VND 98 Nguy Nhu Kon Tum, Thanh Xuan, Hanoi +84 4 37262600 +84 4 37262601 www.tls.vn info@tls.vn
Table I.1.1.2. : Key milestones - TLS was established by Military Jointstock Commercial Company (MB), head office is at 14C Ly Nam De, Hoan 2000 Kiem, Hanoi - 1 of the first securities companies of Vietnam - Initial charter capital is 9,000,000,000 VND - Charter capital increased to 43,000,000,000 VND 2003 - established Branch in Ho Chi Minh city 2006 - Charter capital at 120,000,000,000 VND - TLS transformed into Joint stock Company 2007 - Charter capital increased to 300,000,000,000 VND 2008 - Charter capital at 420,000,000,000 VND - Established Branch in Hai Phong - Charter Capital increased to 800,000,000,000 VND 2009 - No. 1 brokerage market share in HSX and HNX - Achieved Most favorite Securities Company at HNX voted by Investment Magazine and HNX - Charter capital reached 1,200,000,000,000 VND - Established branch in Vung Tau 2010 - No. 1 brokerage market share in HSX and HNX - Vietnam strong Trademark 2010 voted by Ministry of Industry and Trade and Vietnam Economy Newspaper - Applied New core system and upgraded online transaction software - Restructure the organization and activities on a clean, 2011 effective, safe and economical basis - Head office moved to 98 Nguy Nhu Kon Tum, Thanh Xuan, Hanoi 2012 Re-branding to new name - Legal company name: MB Securities Joint Stock Company - Trading name: MB Securities Company
Short name: MBS Charter capital: 1,200,000,000,000 VND
Table I.1.1.3. : Branches Add: 28A Ly Tu Trong, hong Bang District, Hai Phong City Hai Phong City Tel: +84 31 4509666 Fax: +84 31 3821885 Add: Floor 2, Petro Vietnam Building, No. 1-5 Le Duan, District 1, Ho Chi Minh City Ho Chi Minh City Tel: +84 8 39106411 Fax: +84 8 39106412 Add: Floor 1, VCCI Vung Tau Building, No. 115 Nguyen Thai Hoc, Vung Tau City Vung Tau Tel: + 84 64 3594849 Fax: + 84 64 3594050 2. Organizational personnel structure 2.1. Organizational structure
Graph I.2.1. : ORGANIZATION CHART

SHAREHOLDERS
SUPERVISORY BOARD
BOARD OF DIRECTOR
MANAGEMENT TEAM
SECRETARIES
LEGAL COUNCIL
INTERNAL AUDIT
RISK MANAGEME NT
POLICY COUNCIL
SECURIT IES SERVICE S
OPERATI ON
INVESTME NT BANKING
RESEA RCH
ACCOUNTI NG & FINANCE
IT CENTE R
GENER AL ADMIN
BRANCHES & TRANSACTIO N OFFICES
2.2. Personnel structure and qualification Number of officers and staff Up to 31/12/2011, the total number of personnel in MBS is 407 persons (an increase of 97 person compared with 310 of 2009 and a decrease of 170 persons compared with 577 of 2010). There are tens of analysts and hundreds of Personal Customer Service (PCS) who are well-trained and qualified, ethical and constantly strive to supply the best services and business solutions for customers. Table II.2.2. : Structure of officers and staff in 2011 Qualification Quantity (person) Ratio (%) Doctor 4 0.7 Master 56 9.7 Bachelor 477 82.7 No degree 40 6.9 Total 577 100 Executive Committee Mr. Luu Trung Thai Position: Chairman of Management team General Director of TLS Qualification: Master of Business Administration Work experience: 16 years working in fields of Finance - Banking and Securities. Mr. Trinh Khac Hau Position: Deputy General Director of TLS Qualifications: Doctor of Economics Work experience: 27 years working in fields of Finance - Banking and Securities Mr. Quach Manh Hao Position: Member of Management Team Deputy General Director of TLS Qualifications: Doctor of Economics Work experience: 15 years working in fields of Finance - Banking and Securities. Mr. Mac Quang Huy Position: Deputy General Director of TLS Qualifications: Doctor of Economics Work experience: 13 years working in fields of Finance Banking and Securities. 3. Services supplied by MBS 3.1. Individual Clients 3.1.1. Securities services Brokerage services MBS acts as a financial intermediary, advising clients in buying/selling listed and unlisted securities on stock market. With the largest market share in term of brokerage services, in both HSX and HNX since 2009, MBS has been seen as the leading service provider in brokerage service in Vietnams stock market. The firm has focused on attracting and recruiting talent, investing in advanced technologies and
committing to provide our customers with the best quality of analysis and investment advisory in the financial market. Investment Advisory MBS has a strong team of Private Client Services (PCS), who are trained to provide accurate and reliable investment advisory to clients. Our PCS team is supported by Research group, which produce various in-depth and independent research reports on a regular basis. In addition, MBS also established a Retail Investment Advisory team, which issues reports customized to the needs of retail investors. Custodian services Securities custodian services involve MBS coordinating with Vietnam Securities Depository (VSD) to keep safe of clients securities, execute procedures to transfer securities into clients trading account so that the client can trade and receive the rights related to securities. Financing products With a strong financial capability and the backing from MB Group, MBS is able to meet the financing demands of clients and partners through a suite of diverse financial products. Over the past years, MBS has developed a large network of partners, who can provide the funding to MBS. Popular financing products include cash advance of sales proceeds before settlement date, mortgage of listed securities via a business cooperation contract, margin lending, repo of unlisted securities, as well as customized products. Finance products include: Mortgage of securities, Pledge of securities with MB and Cash advance 3.1.2. Research Market research Market commentaries focus on four areas of investors interest, including market developments, local and global fundamentals, and market players activities. MBSs commentaries include technical comments to help investors identifying market signals. Besides, we study the most popular investment strategies on the market and recommend a stock watch-list for each of these strategies. Economic research The Economic Research Team offers periodic reports on macroeconomics, monetary policies, fixed income and equity markets. The aims are twofold: (i) providing investors with the most updated macro data and issues; and (ii) analyzing and forecasting macro data for Vietnam economy monthly, quarterly. MBSs intimate knowledge of the local economy is a significant advantage when developing our proprietary economic forecasts and commentaries. This will help customers to make their investment decisions at the lowest risks. The official publication of this research team is Vietnam Outlook a monthly report focusing on key macroeconomic issues such as growth, inflation, trade,
monetary policy and equity market developments in Vietnam, including proprietary forecasts. Equity research MBS analysts are allocated into five teams, including real estate, financials, basic materials, industrials and technology, and consumer goods and utilities. At present, they cover a portfolio of more than 30 listed stocks which are selected based on our own criteria. This portfolio is reviewed quarterly and approved by our research committee. Analysts write reports on these stocks on monthly basis with each of them having a pre-scheduled publishing date. In addition to the portfolio, analysts actively seek for undervalued stocks in the sector they cover. Analysts are expected to give their opinion on BUY/HOLD/SELL with BUY recommendation going to stocks with +15% return potential and SELL to those with -15%. - Equity Report: A standard report covering 4 sections: investment highlights, valuation, risks and appendix of business models. - Sector Review: A standard report detailing sector prospective, key players and stock picks. Fixed income research The fixed income team provides periodic research on money market performance, banking industry and bond markets, including government and corporate bonds. The official publication of this team is Fixed Income a report which is published weekly. 3.1.3. Foreign Individual Clients Contact: TLS Vietnam Sales & Client Trading Group 3.2. Institutional Clients 3.2.1. Institutional Client Services Client cares MBS handles trading disputes and special requests for clients. Standard services include obtaining trading code, opening/closing accounts, money transfer, account reporting, and statutory filings. Brokerage services Primary securities market: MBS provides deal sourcing and advisory services covering OTC securities markets and private equity. In addition, it distributes securities products through book building process from MBSs Investment Banking Division. Secondary equity market (List equity market): MBS acts as lead broker and liquidity facilitator in large block trades (put-thru) across sectors and market segments. Secondary bond market (List bond market): As one of a few registered members of the Special Electronic Bond Exchange, MBS acts as lead broker participating in bond auction and trading. Trading services
MBS is capable of both Direct Market Access (DMA) and Execution Desk Access (EDA). Direct Market Access: Clients can place trades directly onto the stock exchanges through MBSs state-of-the art electronic trading platform. In addition, the STP connectivity is dedicated for institutional clients who wish to implement STP with FIX compliance. Execution Desk Access: Through channels such as Interactive Broker Chat, Direct Phone Line, Fax, Email, Bloomberg Order Routing, clients can instruct MBSs trading specialists who execute clients orders with speed and accuracy. Securities services Financing services: Clients can enjoy a wide range of MBSs financing services including cash advance, securities mortgage, REPO, sales-and-buybacks, swaps, and structures. Custody services: MBS provides securities registration, securities depository, share certificate safe-keeping, portfolio reports, and proxy services. 3.2.2. Research (the same details with research services for individual clients) Market research Economic research Equity research Fixed income research 3.2.3. Investment banking Equity capital market (ECM) The ECM Team advises corporate clients on issuance plan, procedures and legal requirements to issue equity instruments such as common shares, preferred shares, share warrants and convertible As one of the top securities brokers in Vietnam, MBS has developed a diversified network of institutional and High Net Worth (HNW) individual clients and this is an advantage that helps clients in successfully raising funds via public offers and/or private placements. MBS also offers underwriting services to give clients the peace of mind with a guaranteed success of the issuance. Activities are: Deal planning, advice on legal requirements, equity distribution and equity issuance underwriting. Debt capital market (DCM) The DCM Team advises corporate clients on issuance plans, legal procedures and legal requirements to issue debt instruments such as corporate bonds. MBS has developed a diversified network of commercial banks, insurance companies, foreign and local institutional investors. This is an advantage that helps clients in successfully raising debts via public offers and/or private placements. MBS also offers underwriting services to give clients the peace of mind with a guaranteed success of the issuance.
In recent years, the fixed income market in Vietnam has developed dramatically in scale as well as depth. Institutional investors have shown interest in fixed income products and thus fund raising via bond market has been chosen by many companies. With a diversified network of clients and partners and an experienced DCM team with deep understanding of financial products and fixed income market, MBS is proud as one of the best and professional Vietnams bond houses. It has successfully completed many deals advising our clients in structuring and planning bond issuance as well as introducing attractive investment opportunities to potential investors. MBS has also successfully underwritten a number of debt issuances. Activities are: deal planning, advice on legal requirements, debt distribution and debt underwriting. M&A advisory The M&A Team assists clients in finding a right partner(s) whether the clients are buyers or sellers, working out a win-win solution for both buyers and sellers. MBS provides a full package service to assist buyer/seller in deal structuring, selecting the targets, conducting due diligence (DD), valuation, negotiation, regulatory approval and supporting in required legal procedures for successful transactions. The client portfolio, who use MBSs corporate advisory services has been continuously expanded, enabling us to build up the most updated and reliable database of investment opportunities in various industries such as financial services, consumer goods, health care, education, real estate, utilities, industrial zones, power plants, and ports, etc., in Vietnams major cities and provinces. MBSs strong experience in working with and deep understanding of investors requirements from different jurisdictions will substantially facilitate the matching process. Activities include: Introduction and assistance in assessment of opportunities, advice on Vietnamese legal requirements, assistance in conducting due diligence and valuation, facilitation in negotiation and assistance in obtaining regulatory approval. Financial advisory Activities include: equitisation, securities listing, corporate restructuring, investor relations and changing the legal form of a company.
CHAPTER II: CURRENT CONDITION Current condition of brokerage activities in MBS (2009-2011) Usually brokerage activity plays the largest proportion of the net revenue of a securities company. Therefore, based on brokerage figures we can observe clearly the nature and condition of the firm. Being one of the first leaders in securities business, MBS has been trying hard to place and remain itself in the TOP firms in brokerage market share, then develop the company in a healthy process. Going through more than 10 years with both opportunities and challenges, MBS has proved to take good advantage of brokerage to create prestige and profit. The current condition of MBS can be evaluated through different lenses, yet within the size of the report, I would like to analyze three assessing criteria: ratio of brokerage revenues over other activities revenues, the number of customer accounts opened in MBS and brokerage market share of MBS. 1. Quantity of Customer Accounts opened in MBS Even though the competition between securities companies is becoming quite fierce, MBS keeps on competing fairly, providing customers with the products and services at secured quality. While seeking new customers, MBS also takes good cares of the existing customers on the base of services quality, product utility, modern technology and serving customers demand quickly and exactly. Consequently, the number of customer accounts opened in MBS is always on the rise, which starts with a nearly two times increase 2009 from about 15,000 accounts to almost 27,000 accounts.
Graph II.1. : Number of managed accounts opened at MBS Besides focusing on business operation, brokerage department of MBS has worked hard to quickly modify organizing chart, adjust flexibly different commission policies towards brokers, creating fair working environment, encouraging staff to work effectively and bringing back higher revenue to the brokerage department and the company as a whole.
In 2010, MBS succeeded in remaining the 1st place on brokering securities on both Hochiminh Stock Exchange (HOSE) and Hanoi Stock Exchange (HNX) with the market share of 10,04% and 11,09% respectively. Customer trust continues to be guaranteed by the changing policies to match with changing demands and qualities. In 2011, despite flat movement of Vietnam stock market in 2011, MBS has continued improving services quality, consolidating customers trust to strengthen customer network. At the end of 2011, the number of managed accounts has exceeded 51,000 accounts (an increase of 91,1% in comparison with 2009s figure and 12,6% in comparison with 2010). In general, MBS management team has struggled to bring out appropriate changes in business strategies to overcome the hardship of contemporary securities market, which is aimed at ensuring safe and effective operations instead of concentrating too much on increasing market share. In another aspect, we can see that there has been a big differentiation between proportions of customer groups opening accounts in MBS, as shown below: Table II.1. : Number of accounts opened by investors Number of Domestic Investors Foreign Investors Year Individuals Institution Individual Institution Investors 2008 14,347 14,190 55 94 8 2009 26,301 26,108 88 94 11 2010 42,859 42,582 167 99 11 Total 83,507 82,880 310 287 40 Its clear from the table that the number of accounts is increasing through years. Up to 2010, there were 42,859 accounts opened by investors at MBS, which accounts for 4.1% of the number of accounts opened in the stock market (HOSE market only). Of these increasing figures, the highest accounts come from domestic individual group, followed by domestic institutions, foreign individuals and foreign investors. A dramatic nearly four times rise can be seen from the foreign institution group in 2011, which promises a positive upward trend of foreign investor to MBS in the near future. At the same time, the domestic individuals still holds a strong proportion of and shares the same trend with the total accounts number, affirming stable development for the company. Overall, year 2009 with surprising and impressive growth of Vietnam stock market has played as a strong lever for MBS to double up its brokerage business in 2010 and remain its TOP market share position. Right after the fruitful period comes year 2011 full of hardship, yet a 12,6% rise in customer accounts has reinforced MBS unshakeable development. 2. Ratio of brokerage revenues over Sales Throughout the three-year period, a positive growth rate of the economy in 2009, up-to-date advancements in technology and high-skilled personnel structure in 2010 and 2011 could not help MBS to overcome the impacts of global economic crisis, pressures from governments monetary policies and the downturn of Vietnam
stock market in 2011. Increasing net revenues and net profits in 2009-2010 have been followed by a nosedive in revenue and a negative net profit one year later. Table II.2.1. : Trading value and Brokerage revenues of MBS, HOSE and HNX Criteria 2009 2010 2011 Trading value (thousand VND) MBS 1,966,359,070 5,561,779,010 6,065,090,790 HOSE 433,299,000,000 378,402,000,000 159,579,191,000 HNX 197,524,000,000 242,595,000,000 95,847,067,854 Brokerage revenues (thousand VND) 192,133,063 234,528,470 56,232,682
Surprisingly, MBS still stands strong as the leading securities company, holding the top high market shares in both HOSE and HNX. The trading value of MBS has experienced a triple increase from 2009 to 2010 (at 5,562 billion VND), then rose by 9.05% in 2011 due to the hardship in the whole stock market. Compared with growth rate of the whole market, it is evident that MBSs growth stays positive against the downward trend of HOSE and the unsteady trend of HNXs trading value. Brokerage revenues of the company reached a peak in 2010 at about 235 billion VND then declined by nearly four times to 56 billion VND. This condition in fact cannot help boost up the companys negative profit figures, which means that brokerage operation in MBS is not strong enough to take MBS back to the wealthy track and a restructure of all operations of the company is needed to get out of the hard time. Table II.2.2. : Ratio of Brokerage Revenues over Net Revenues % % Criteria 2009 2010 increase 2011 increase (decrease) (decrease) Brokerage 192,133,063 234,528,470 + 22% 56,232,682 - 76% Revenues Net 676,257,106 1,307,065,634 + 93% 690,309,178 - 47% Revenues Ratio of 28% 18% - 10% 8.15% - 9.85% BR/NR
Graph II.2. : Ratio of Brokerage Revenues over Net Revenues in 3 years
From the graphs we can see that Brokerage expense follows the same trend with net revenues of MBS, though at reversing rates. Revenues from brokerage activities increased by only a fifth while Net revenues nearly doubled in 2010 and vice versa in 2011, Net revenues fell by a half while brokerage revenues plummet by 76%. The ratio of brokerage activity over net revenues as a result experienced steady decline by about 10% every year. This may be due to the fact that the temporarily weak condition of stock market has forced securities companies to contract the business scale to remain business operations, and MBS is not an exception. 3. Market share of brokerage activities Table II.3. : Market share based on trading value of MBS Market share (based on trading 2009 2010 2011 value) / year On HOSE 9.13% 10.04% 5.46% st st Rank 1 1 3rd On HNX 11.98% 6.75% st Rank 1 1st Regarding market share, we can see the same movement of MBSs market share on both stock Exchanges. A high-share peak in 2010 cannot lift up the companys market share when facing with unpredictable variations of Vn-Index in 2011. All the indices including GDP, CPI, securities index, average trading value went down dramatically together with the downturn of the stock market, which leads to the contraction plans and even disappearance of brokerage activities in some companies. Nevertheless, in the competition with big securities companies like VNDirect, Hochiminh Securities (HSC), Saigon Securities (SSI) MBS really worked hard to remain in the TOP 3 market share on trading value. This is another reason while MBS can be confident to uphold customers trust on a leading securities company despite variations in the stock market generally and the difficulties that it has to face.
CHAPTER III: EVALUATION AND SOLUTIONS 1. Evaluating brokerage activities of MBS 1.1. Achievements During 12 years since establishment, brokerage operation of MBS has achieved remarkable results with increasing customer accounts opened in MBS, revenues from brokerage activities goes up steadily up to 2010. MBS not only can remain traditional customers but also attract more new ones, including customers from other securities companies. Most customers coming to MBS are convinced by the enthusiastic serving manner, spacious material base and well-trained and professional brokers. The charter capital of MBS is added up through years, peaking at 1,200 billion VND in 2012, showing a potential financial ability. The firm keeps on accomplishing operating processes, developing ordering forms from customers and applying advanced technology to create the best working environment for all brokers and the best business-dealing place for customers. 1.2. Limitations and causes 1.2.1. Limitations In spite of impressive growth in all aspects in 2010, MBS failed to reinforce brokerage activities when facing with difficulties in 2011, which does not go right with the purpose of a securities firm. The limitations can be seen in the decreasing market share in HOSE (a 76% decrease), leading to a 2-step drop of MBSs rank on this stock market. A 10% decline in two consecutive years in brokerage revenues proportion in MBS net revenues and a cut off of staff is the consequence of the firms contraction plan in the situation of the bleak market. Moreover, a rise of only 12,6% in customer accounts number also foretell an unstable movement. All of these have influenced directly to the development of brokerage activities. 1.2.2. Causes 1.2.2.1. Objective causes Following are the causes that belong to the securities company, including: - Brokerage staff: Most of the brokers now have worked in fields of finance, insurance, informatics and have little experience working in securities. The number of staff with a Doctor degree is only 4, and more than 80% of the staff has a Bachelor degree, so they have just started to keep pace with the market movements. At the moment, the company is supporting staff with chances to take part in short-term training programs on both soft skills and professional skills to assure the best services and broker effectiveness toward customers. The formation of a young, enthusiastic and professional broker crew should be of high concern so they can work effectively to build up and remain a good relation with customers, then creating a long-term customer base for the company. - The operating model of MBS: The companys head office is located on Nguy Nhu Kon Tum Street a building in the newly developing area of Hanoi, yet a bit too far from the center of the city and the local area is still under construction, which maybe a
disadvantage for MBS. However, a spacious material base is good enough to attract investors as it shows its position and potential. Beside the branches in Hai Phong, Ho Chi Minh City and Vung Tau, the company should also pay attention to the potential evolvement of the Centre of Vietnam. With the prestige of Military Bank as the parent bank, a specific network development orientation in other big cities of Vietnam will surely help MBS to exploit the potential of these new markets. - Last but not least is the commission policy of MBS. In addition to basic salary and regulated insurance, MBSs staff can get bonus salary based on individual working results. Other aids such as lunch allowance, fuel and telephone feeare also provided. These help encourage staff to try harder for their missions. 1.2.2.2. Subjective causes - Market element: MBS was established and developed at the same time with Vietnam stock market; however a period of over 10 years cannot be a guarantee for a healthy stock market, especially when the market is still full of risks, making investor hesitate to take part in. This is a challenge and an opportunity for securities companies: + Opportunity: many investors really need advisory from financial experts brokers, which will help increase brokerage revenues. + Challenge: As risks come along with profits, asymmetric information and moral hazard sometimes advices from brokers are not accurate, leading to dispute over rights with customers. - MBS also has its own strength to have huge capital source and to be supported strongly by its parent Bank Military Bank. MBS needs to develop cooperation with firms based on the relations that MB has created. Up to now, peoples knowledge on securities and stock market has been improved, yet still possess limitations. Beside provided services, MBS should also develop information services or hold meetings with students in universities to provide basic knowledge on securities and stock market This will also be a good place for MBS to market its utilizing transaction supporting services toward the future investors generation. - Association of Vietnam Securities Business (VASB): the being of VASB has not been effective when it cannot bring out any effective set of rules on ethics of a broker; also it has not provided any information distributor, which does not secure a good practice in stock market as a whole. This also let many brokers to do business through the niche of the law, causing damage to customers and creating fears in investors to accept advice from brokers. Conclusion: We have got some basics about the formation and development of the company through the organization chart and personnel. The current brokerage condition in MBS is revealed, showing the achievements and limitations of the firm. We now will base on these aspects to find out possible solution to develop brokerage operation of MBS.
2. Solutions for developing brokerage activities in MBS 2.1. Theoretical basis for developing brokerage activities in MBS 2.1.1. Vietnam stock market developing orientation The formation of Vietnam stock market is indispensable to the development process of the Socialist-oriented market economy of the Party and the Nation. In fact, stock market has helped open a fund-mobilizing channel in mid-term and long-term for the Government, local authorities, firms and also brings back potential and opportunities for investors. Although stock market in 2011 has experienced hardship, the inner side of it still has positive points. The brightest thing of 2011 is that there was no serious breakage in the economy. One year after drastic implementation of Resolution No. 11/CP of the Government, the macro economy is changing positively. GDP grows at about 6%; CPI in final 5 months stays below 1%; balance of payment is forecasted to have a surplus of more than 3 billion USD, while 2009 and 2010 BOP deficits 8,8 billion and 3,07 billion USD respectively; exchange rate USD/VND at the end of the year has been controlled, the chaotic in the mobilizing interest rate has been stopped Another outstanding point in 2011 is that the mission of forming, completing the legal frame for stock market activities of the managerial authority has been executed. One of the important legal documents is the Decree on conducting Securities Act and Law on amending and supplementing Securities Act has been prepared carefully and elaborately, submitted to the Government. Issues on improving issuing standards, listed and traded securities quality have been concerned in the Decree. According to the leader of State Securities Commission of Vietnam (SSC), this Decree will be promulgated in the first months of 2012. Right after that, a set of other guiding documents will be issued after being fully worked-out to create a legal lobby for Vietnam Stock market to operate on a healthy, safe and effective basic. In the upcoming period, for Vietnam stock market to become the efficient fundmobilizing channel for the economy, the Government and SSC have released the strategy on developing Vietnam stock market in the period 2011-2020 based on the following objectives: Increase the scale, depth and liquidity of stock market - Push up total capitalized value on stock market in 2020 to cover 70% off GDP; bring bond market to become an important fund mobilizing and distributing channel for economic development. - Diversify investors base, develop institution investor system, stimulate long-term foreign investment and train individual investors. Improve efficiency of stock market - Restructure the organizational model of stock market toward the state when the whole economy has only one Stock Exchange and step by step capitalize the Stock Exchange to assure unification on operation and convenience in improving managerial capacity and attracting funds from market members;
- Modernize material base, vary trading methods and operational products of the Stock Exchange, Securities Depository Centre; and then gradually collaborate with Stock Exchanges and Securities Depository Centers in ASEAN. Increase competing capacity of intermediary institutions and supporting organizations on the basic of reorganizing securities companies by increasing scale and financial potential, diversify operational activities in accordance with international practice; open the market to foreign intermediary institutions appropriate with commitment process and competitive level of domestic institutions. Increase management, supervision and enforcement capacity of state managerial institution on the basic of allowing SSC to have all power to execute management, supervision, inspection and enforcement. Take part in ASEAN and global markets connecting programs following developing process and requirements on financial securities, improve competitive advantage, risks limit ability, by which to shorten the development distance between Vietnam stock market and other stock markets in the region and all over the world. Joint the multilateral global cooperation between Securities Commissions of countries within the framework of multilateral Memorandum of International Organization of Securities Commissions (IOSCO). 2.1.2. MBSs developing orientation 2.1.2.1. Assessing achievements and weak-points In 2011, Vietnam stock market has gone backward from expectation of securities companies, analysts and investors on recovery ability. Business activities of these firms have to deal with much hardship, most of them bear loss and cannot accomplish their objectives, and MBS is not out of that trend. Total revenues in 2011 were reduced by nearly a half to 700 billion VND while profit figure ended with a negative number of 600 billion VND. Despite the sagging market share, MBS still holds up the 1st place in HNX (6.75%) and stands in TOP 3 in HOSE (5.46%). It also researches and applies New Core system, upgrading and supplementing new utilizing function to the online securities trading soft wares such as Stock24, Quote24 to create more added values to customers. Eventually, the customer account number still goes on the rising track though at lower growth rate. Some aspects yet should be paid more attention to secure further stable development: - training and developing human resources - investment in technology developments (soft wares and hard wares) - quality and competitive advantages of products and services - building trustworthy business culture and trademark - effective management of the company and its secured operations
The requirements are to be met up by all staff of MBS with serious attitude and self-discipline to improve the weaknesses and bring on strengths and opportunities in the next period. 2.1.2.2. Main objectives and tasks orientation in 2012 In 2012, the economic condition is forecasted to continue being pessimistic, yet the Government has executed some macro modifications, hoping for a more optimistic future for the economy, the stock market and companies in the following years. MBS will take this chance to restructure and become one institution that has solid developing strategy, cooperates closely with MB Corporation and stands work with investors and partners to create long-term values. MBS has had one year of hard work but cannot avoid negative impacts from dizzy stock market and serious issues on corporate management which is not proportional with the scale and complication of securities business and investment banking fields. Harder working attitudes and quick improvement of steady element in business culture, business model, risk management and investment management in the rapidly changing business environment would be the spirit and action of MBS in 2012. Table III.2.1.2.2: Objectives of 2012 Objective Year 2012 (thousand VND) Net revenues 309,854,264 Revenues from brokerage activities 35,500,000 Revenues from proprietary trading 75,000,000 Revenues from consultancy activities 19,793,264 Revenues on business capital 179,561,000 Expense 299,325,381 Financial expense 180,225,000 Operating expense 119,100,381 Profit before tax 10,528,883 After a loss of 592 billion VND in 2011, in 2012, MBS plans to get a profit before tax of 10,5 billion VND, net revenues at nearly 310 billion VND including 35,5 billion from brokerage, 75 billion from proprietary trading and 179,5 billion from business capital. Regarding Brokerage business, instead of striving for increasing brokerage market share, MBS aims at placing itself in the TOP 3 in brokerage market share and concentrating more on increasing market share of other businesses. For remaining the old customer base and attracting more new customers, MBS targets at improving services quality, upgrading and developing new online products and providing brokers crew with updated training programs and commission policies. These innovation will create more competitive advantage for the company over other securities firms in to overcome upcoming obstacles. MBS also plans on personnel restructure toward a streamline mechanism to increase working capacity, the personnel scale after restructure will be 280 person (a decline of 31% compared with 2011) over the whole MBS system.
The management team brings out the orientation of focusing the largest resources on business operations that create revenues, cut off any expense aimed at break-even point, continues restructuring investment portfolio, settles bad debts, restructures personnel and change the companys trademark identification wholly and sticking with the trademark and image of MB Corporation (after the re-branding from TLS to MBS in May, 2012). As a result, in the first six months of 2012, net revenues of MB has gone up to 165,9 billion VND, accounting for 60% of the whole years plan. Expected profit is to be over 6 billion VND. This successful business is based on the trust and care of customer and a safe loan interest rate without concerning too much on pushing up market share, which leads to the out of expectation good portfolio of many customers, the rate of MBS mortgaged customer is at the lowest points in the market. The development of customer group who uses online services with 70% of buysell orders are executed through e-channels and M&A business also bring new sources of revenues for MBS. In the ranking chart of the first six months, MBS has been taken the 1st place in market share; though still stand strong in the TOP 10. This is important, as brokerage plays important roles in securities firms when proprietary business is not as easy as it was before 2009, meanwhile not any securities companies can execute investment banking services. 2.1.3. Solutions for improving efficiency of brokerage activities in MBS From an overall perspective we can see that MBS has recovered quite positively after all the difficulties and downturn of 2011, yet a firm evolvement cannot be feasible. For MBS to reinforce its reputation to customers and upgrade its position in the stock market, the company surely has to continue improving business operation quality to stand strong in the leading group of securities firms of Vietnam. Brokerage is the basic business of one Security Company, its revenues and market share in the stock market can help assess well the business situation of the company. Obviously, to enhance higher efficiency, brokerage activities should be improved first. Solutions can be: 2.1.3.1. Improve customer strategy To build an all-sided customer policy, brokers need to be able to answer the following questions: 1. Who is the target customer? 2. What is his demand or psychology? 3. What type of products or services can meet up with demand of target customer? 4. What to do to attract the target customer? Stock market is the place where millions of people take part in, they come from all walks of life, from different ages so the company needs to target concrete customer group to create its own trademark. Nowadays, most customers at MBS come from the middle-aged and intelligentsia group. They have quite stable income with big
investment amount and long investment strategy. Understanding this, brokerage department needs to create suitable products. Demands of this group are investing in stock with higher return, yet they also have higher level of risk-prevention compared with other groups. Hence, they really are in need of advice from brokers to opt out appropriate securities. One suitable customer policys feasibility also depends on the combination of different policies, in which each policy play a role. Many factors should be considered to work out a customer policy, in which an attractive price policy should be of importance. This determines the business competitiveness of Securities Company. In the competitive environment, the brokerage charges should be flexible, not too tough and must be changed regularly depending on the markets variations. The charges are to be suitable for each customer group, in different times so that it can help remain long-term relationship with traditional customers and at the same time attract new customers. For this to be done, MBS needs to classify customers in the target group based on different criteria such as trading value, prestigious customers, regular customers, and from that build up various preferential charges. On July 18, 2012, MBS has announced the daily stock trading fee details (applied from July 23, 2012 to the date of new announcement) as follow (quoted): Table III.2.1.3.1. : Charges rate of MBS Comparison Trading Channel Charges rate (%) HSC SSI Online via Internet 0.15 0.25 (Stock24) Offline via other channels Total trading value < < 50 mil: 0.40 0.35 0.35 100 million VND 50-100mil: 0.35 Total trading value 100 300 million 0.325 0.30 0.30 VND Total trading value 300 500 million 0.3 0.25 0.30 VND Total trading value 500 700 million 0.25 0.2 0.25 VND Total trading value 700 1,000 million 0.2 0.2 0.25 VND Total trading value > 1 0.15 0.15 0.25 billion VND This is a competitive charges rate, which is nearly similar with HSCs charges rate and lower than SSIs charges rate. There is no doubt that a large number of
customers would be stimulated to invest in MBS thanks to the favourable charges rate on huge trading volume. However MBS should also build a preferential charges rate for traditional customers for higher commitment and newcomers potential. Flexible changes would be a need to remain MBS competitive advantage in the upcoming periods. 2.1.3.2. Improve brokers quality Improve customer seeking and caring skills Based on brokerage development strategy and customer policy, brokers can seek for customer by: - The recommendation of traditional customers: Brokers needs to create good relation with existing customers as their credit will encourage them to recommend MBS to their friends and relatives. - The personal relation of brokers and the company. Also brokers can take advantage of the potential customer network from Military Bank as its parent bank. - The order-receiving network can help broker to have new source of customers from geological places where there havent been any branches of MBS. - The Advertising and PR campaign: through multimedia such as newspaper, television - MBSs website and individuals email - Conferences and meetings of investors After finding the customer, brokers need to approach them to start consulting indirectly or directly. During the consultancy process, brokers are required to understand customers demand, provide informative documents, discussing with them and give out appropriate instruction and suggestion on buying or selling stocks. Improve communicating skill of brokers This is the most effective method of seeking and keeping customers. The attitudes of brokers are of importance to the image of the company. Brokerage is a stressful operation, every day brokers have to work with many type of customers, which asks for patience, ability to listen and be right on track during the conversation with customer. Improve professional level of brokers Profession of broker will decide most of the success of brokerage activities. Brokers needs to continue mastering their profession and analyzing ability. As a financial expert, customers will see broker as the guider in their financial issues. Therefore, knowledge of brokers is determinant of a successful brokerage deal. Having a professional personnel crew is a competitive advantage of MBS. Yet it needs to pay more attention to training human resources to remain the advantage. Staff should: - Be well-equipped with intensive knowledge on the stock market - Possess skills of a professional broker: + understand customers
+ create healthy working environment: economic environment, corporate culture and individual working space. + be interested in brokerage operation 2.1.3.3. Improve services and products quality Improve operation processes to serve better diversifying demands of customers MBS needs to cooperate closely with other banks to help customers better in performing credit contracts. For this operation to work efficiently, a high credit limit for each lending contract is necessary as borrowing demands of investors is rising while the company still needs to control tightly to prevent possible risks. Diversify forms of services to serve higher demands At the moment the brokerage department of MBS is providing customers the following services: Variation is a promising trend of success, yet MBS needs to have specific criteria to sort out customers into groups, so that when customers are not able to pay for the ordered amount they can be supported by a suitable payment project. Supporting contracts must specify the supporting amount, the charges, time due and solutions for inability to pay back. The execution of this service will help customer be assured of their payment ability and strengthen the company-customer relation. Improve quality of services from brokerage activities - Research and complete brokerage process, correct inappropriate steps. - Simplify order-receiving forms while securing personal safety for customers - Execute long-distance order-receiving by mail, fax, telephone, the Internet, - Accomplish and update regularly companys website to perform online services - Assign steps in working process to brokers for higher efficiency - Cooperate with commercial banks to provide packaged supporting services - Cut off administration procedures which are unnecessary - Perform strictly brokerage processes such as marketing and consultancy, opening and closing account... 2.1.3.4. Improve material base Make sure the material base can meet demands of customers, employees and the company. A well-facilitated material base for the company and brokerage department is essential for an effective working environment: - Facilitations assuring activities of broker should be put first for professional operation - Facilitation for long-term development strategy of the company can be analyzed and implemented synchronously to prevent backward movement or duplication with other competitors Moreover, a highly important factor comes from technical development. MBS seems to have taken good advantages of new soft wares at high utilizing level, and
should bring into play more advancement to boost up brokerage activities by its convenience and time-saving tools. The informatics network and soft wares should be: - highly applicable - safe in protecting personal information when using account searching services - standardized in customer information system for various purposes - able to public regular information to act as an effective information providers for investors The internal information system should also be secured strictly on fast connections to prevent unsuccessful order commands. 2.1.3.5. Other solutions There are many other solutions such as: combining consultancy and brokerage activities; expanding external relations. In the perspective of global integration, MBS should take chances to attract foreign investors with favourable policies. 3. Proposals 3.1. Proposals toward management authorities - Completing and consolidate the enforcement of legal framework on securities Act - Provide securities companies and particularly brokerage activities with preferential policies - Actively create more goods for the stock market - Actively propagate and spread out knowledge on securities and the stock market 3.2. Proposals towards MB As a parent bank of MBS, Military Bank should help MBS to take advantage of the banks capital resources, high technology and customer networks. By this way MBS will be able to expand transaction network and the order-receiving network through MBs branches and transaction offices. 3.3. Proposals towards MBS MBS should build a thorough developing strategic toward increasing brokerage activities ratio. Appropriate adjustments on corporate management scale and size, tight supervising and controlling activities which are proportional with the scale and level of business operation at MBS will secure a stable development. Stimulating policies toward excellent brokers will help to encourage brokers to contribute more to the success of MBS.
CONCLUSION By researching brokerage activities at MB Securities Joint Stock Company we can see that MBS has been trying to improve brokerage operation to boost up the development of the company in particular and the development of Vietnam stock market as a whole. Profession and soft skills of brokers are well-cared and improved with useful training programs, working spirits are supported by profitable commission policies and the high-tech material base with up-to-date technology have contributed to the success of increasing customer network and the quick recovery of MBS net revenues after one year of downturn. These activities should be executed on a regular basis to assure stable capacity of brokers and stable quality of services and products. However, for this retrievement to be firm and steady, MBS should concern about corporate management issues with wholly cover of the business scale of the company, effective risk management In general, to accompany with the developing trend of stock market, a suitable plan and efficient implementation of developing orientation together with a broker crew with high professional operation and ethics to act as dedicated advisor for investors will help develop brokerage operation of MB Securities Joint Stock Company. Within the scope of the research topic, I did give out some possible solutions for developing brokerage activities of the company. During the internship period and research work, I would like to thank staff of brokerage department from MBS for helping and providing me with helpful information and advices to complete this report.
Developing Brokerage Activities at MB Securities Joint Stock Company (MBS) 1. 2. 3. 4. 5. 6.
REFERENCES Website and Annual Reports of Hochiminh Stock Exchange - www.hsx.vn Website and Annual Reports of Hanoi Stock exchange - www.hnx.vn Website and Annual Reports of MB Securities Joint Stock Company www.tls.vn Website of Hochiminh Securities Joint Stock Company www.hsc.com.vn Website of Saigon Securities Incorporation www.ssi.com.vn Website of State Securities Commission of Vietnam www.ssc.gov.vn

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Tran Thi Hong Phuong ID: 0953040070