Morgan Stanley has received clearance to open a securities joint venture in Vietnam following the collapse of plans for a landmark tie-up with a state agency.
The US investment bank, the first of its kind from the west to get directly involved in Communist-ruled Vietnam's securities industry, hopes to profit from a wave of privatisations.
Morgan Stanley said its venture with brokerage Gateway Securities would offer a full range of financial services, including investment banking and advisory services, brokerage services, research and principal investing.
The new tie-up follows the collapse of Morgan Stanley's plan to set up a securities company with the State Investment Corporation of Vietnam, owner of the state-owned companies slated for partial privatisation.
That proposed joint venture had triggered the wrath of rival investment banks, which feared they could be frozen out of lucrative mandates as Vietnam proceeds with its mass privatisation programme. Eventually, SCIC bowed to pressure and pulled out of the deal.
Morgan Stanley Gateway Securities, which will be based in Hanoi, will be 49 per cent owned by Morgan Stanley - the maximum foreign investors can hold in a domestic securities firm.
However, Morgan Stanley would probably seek to increase its stake after 2011 when Vietnam's World Trade Organisation commitments oblige it to open the securities business to majority-foreign-owned firms.
The bank said that as it had a "long-term commitment to Vietnam - if regulations were to change in the future, we would be interested in increasing our investment".
Details of the transaction were not disclosed.
The founders of Gateway Securities include Doan Van An, a businessman with links to PetroVietnam, the state oil company. Mr An is vice-chairman of GP Bank, 20 per cent owned by PetroVietnam, and is also a founder of a petroleum logistics company 35 per cent owned by PetroVietnam.
Morgan Stanley said Mr An had sold his Gateway shares as part of the deal and that neither PetroVietnam nor any of its subsidiaries was involved in the firm.
In December, Morgan Stanley paid $217m for a 10 per cent stake in PetroVietnam Finance Corp, which works as a de facto bank financing energy projects for the company.
Vietnam's stock market rose 144 per cent in 2006 but has cooled considerably since. It ended 2007 up just 23 per cent and is down almost 12 per cent so far this year.
The Hanoi government has also decided to slow the privatisation process, postponing several big initial public offerings amid poor market sentiment.
