Securities firms can borrow more to serve the increasing demand of customers. — Photo cafef.vn
HÀ NỘI — With securities firms now allowed to increase their total liabilities to serve the increasing number of customers, the Vietnamese market has never been more active.
According to Circular 121/TT-BTC effective from February 15, 2021, securities companies could have debts of up to five times their equity instead of three times as before.
Experts said the circular was a turning point to help securities companies have more sources for business activities to serve the increased interest in the market.
In the context of lower deposit interest rates, while other business activities have struggled due to the impact of the COVID-19 pandemic, the securities sector has become attractive to many new investors.
According to the Vietnam Securities Depository, domestic investors opened 366,816 new securities accounts in the first four months of this year, equal to 93 per cent of the number of new accounts opened in the whole of 2020. The number of new accounts opened last year was a record and double the figure from 2019.
Insiders say the strong influx of domestic investors has helped market liquidity explode and a session with VNĐ20 trillion traded is no longer rare. The sharp increase in liquidity has even led to order congestion.
Statistics in the first quarter show the average matching value on HoSE topped VNĐ14 trillion, an increase of 62 per cent compared to the previous quarter and nearly five times higher than the same period last year.
Insiders also mentioned margin cash flow as an important contribution to the increase in liquidity, estimating that outstanding loans in the whole market by the end of the first quarter of 2021 were worth VNĐ110 trillion (US$4.8 billion), a record high for the local stock market.
Compared to the last quarter of 2020, outstanding loans of securities companies in the market increased by about VNĐ20 trillion.
To meet the lending demand of the market, securities companies have raised capital through the issuance of shares to existing shareholders, private placement as well as increased mobilisation of resources through bonds and loans from foreign organisations.
From the beginning of the year, securities companies are estimated to have mobilised more than VNĐ6.5 trillion from bond issuance including VNĐ1.2 trillion from Asia Commercial Bank Securities (ACBS), VNĐ1.5 trillion from Saigon – Hanoi Securities JSC (SHS) and VNĐ1.1 trillion from Viet Capital Securities JSC (VCSC).
As another channel, securities companies have taken loans out with foreign organisations. Recently, HSC signed an unsecured loan contract worth $44 million or more than VNĐ1 trillion with a group of seven Taiwanese financial institutions, led by First Commercial Bank (FCB).
Earlier in March and April, VietinBank Securities (CTS) signed loan packages with a total value of $90 million (more than VNĐ2 trillion) from a group of Korean and Taiwanese banks.
The total value of loans that securities companies have taken since the beginning of the year through bonds and unsecured loans is thought to be nearly VNĐ10 trillion.
Along with bonds, securities companies have issued shares to meet capital needs for business activities and increase equity, enabling them to offer more in loans to their customers.
According to current regulations, securities companies were only allowed to lend out a maximum value of two times their equity, but by the end of the first quarter of 2021, many securities companies had almost reached the maximum lending threshold. Therefore, the issuance of shares is considered vital for the competitiveness of securities companies.
A series of large securities companies such as VNDirect, MBS, HSB, VCSC have all increased their capital by trillions of đồng from share issuance while some small securities companies have plans to raise capital such as Pinetree, Đại Nam (DNSE), Đà Nẵng (DNSC) and Everest (EVS) to strengthen their financial capacity.
With margin lending interest rates between 12 and 14 per cent annually, securities companies that often borrow at a rate of about 8 per cent could earn a large profit from lending activities.
On the stock market, shares of securities firms have gained, with winners including Vietinbank Securities Co (CTS), Bank for Investment & Development of Vietnam Securities Company (BSI), MB Securities JSC (MBS), Hồ Chí Minh City Securities Corporation (HCM), SSI Securities Corporation (SSI) and Sacombank Securities Company (SBS).
As of market closing on Monday, most securities stocks have grown by tens of per cent since the beginning of the year. — VNS
