Vietnam's big brokerages, flush with profits from a banner year, are busy amassing a financial war chest for investment in Asia's fastest-growing stock market and in preparation for a wave of borrowing from local margin traders.

 The main VN index has risen 33 percent in the past two years, supported by Vietnam's low inflation, economic growth, promises of finance reforms and plans to "equitise", or privatise, hundreds of state firms. The gains have rewarded the top 12 brokerages, which posted an average 81 percent jump in net profit last year.

 Nine of the 12 brokerages that Thomson Reuters spoke to have either raised funds through stocks and bonds or are planning to venture into the capital markets in the months ahead. They will likely raise a total of $340 million in the two years ending this December, according to company estimates compiled by Thomson Reuters. "Our goal is to stay in the top 10 and to increase our market share. We also expect liquidity to be solid," said Nguyen Hoang Thien Truc, general manager of Maybank Kim Eng Securities in Vietnam.

Vietnam's brokerages are racing to secure a bigger foothold in the highly competitive sector as the government moves to upgrade the stock market to emerging from frontier status, lift restrictions on foreign holdings, and merge the Ho Chi Minh Stock Exchange and the far smaller Hanoi Stock Exchange to attract foreign investors and boost liquidity. As of early March, Vietnam had made the most gains among Asian bourses this year, up more than 10 percent.

 All of this comes with a health warning. An illiquid market driven by margin lending exposes shares to sharper declines in the event of an external shock. Retail investors missing their margin calls risk sinking into debt. Retail investors also account for most of the market's deals, and they have tended to be shorter-term investors, selling shares quickly at the first sign of trouble. This means brokerages are vulnerable to volatility in earnings. Foreign investors are not necessarily enamoured by the market either. When state-controlled Vietnam Airlines IPO-VAL.HM launched its initial public offering late last year, barely any foreign investor came forward.