Citigroup Inc. took a stake in a Vietnamese brokerage firm, betting that once the economy's rampant inflation slows, foreign investors will flock back to the country.
The New York bank signed a deal Thursday to buy a 9.9% stake in Horizon Securities Corp. for an undisclosed amount, becoming one of a few foreign firms to own a stake in a local broker. Others include Japan's Daiwa Securities Group Inc. and Morgan Stanley.
Citi's purchase comes at a time when Vietnam's economy is floundering. Inflation is running around 20%, a level the World Bank has labeled "intolerable," and the stock market is trading well below its 2007 peak. Labor strikes are spreading.
"Fundamentally we're very bullish on Vietnam, despite the short-term pressures on the economy," said Brett Krause, head of Citigroup in Vietnam. He believes the government's policies are starting to have an impact.
"Arguably now is a good time to come into the market as it starts to consolidate," said Citi's Mr. Krause. If Citi decides to take a larger stake, it will then bring the local broker's technology, service and compliance standards into line with Citi's practices globally, he added.
"This is a platform that we can work together with moving forward," said Mr. Krause.
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