A stock market tussle lays bare Vietnam’s north-south divide

Ho Chi Minh City is the economic and financial hub but Hanoi could host new merged exchange

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, who 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 8m), or Ho Chi Minh City, the business hub of 9-10m.

At stake is something bigger than whether the index arbiter Morgan Stanley upgrades Vietnam to “emerging market” status (it’s still classified as a frontier market). The question gets at the heart of tensions between the 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 centre; 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 1,700km 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 capitalisation of about $150bn, is more than 10 times the size of Hanoi’s. Most big companies, whether based in north or south, list on the HOSE. Ms 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.”