Illustrative image (Photo: VNA) Hanoi (VNS/VNA) - With securities firms now allowed to increase their totalliabilities to serve the increasing number of customers, the Vietnamese markethas never been more active.
Accordingto Circular 121/TT-BTC effective from February 15, 2021, securities companiescould have debts of up to five times their equity instead of three timesas before.
Expertssaid the circular was a turning point to help securities companies have moresources for business activities to serve the increased interest inthe market.
Inthe context of lower deposit interest rates, while other businessactivities have struggled due to the impact of the COVID-19 pandemic, thesecurities sector has become attractive to many new investors.
Accordingto the Vietnam Securities Depository, domestic investors opened366,816 new securities accounts in the first four months of this year,equal to 93 percent of the number of new accounts opened in the whole of2020. The number of new accounts opened last year was a record and doublethe figure from 2019.
Insiderssay the strong influx of domestic investors has helped market liquidityexplode and a session with 20 trillion VND traded is no longer rare. Thesharp increase in liquidity has even led to order congestion.
Statisticsin the first quarter show the average matching value on HoSE topped 14 trillionVND, an increase of 62 percent compared to the previous quarter and nearlyfive times higher than the same period last year.
Insidersalso mentioned margin cash flow as an important contribution to the increase inliquidity, estimating that outstanding loans in the whole market by theend of the first quarter of 2021 were worth 110 trillion VND (4.8 billion USD),a record high for the local stock market.
Comparedto the last quarter of 2020, outstanding loans of securities companies in themarket increased by about 20 trillion VND.
Tomeet the lending demand of the market, securities companies have raised capitalthrough the issuance of shares to existing shareholders, private placement aswell as increased mobilisation of resources through bonds and loans fromforeign organisations.
Fromthe beginning of the year, securities companies are estimated to havemobilised more than 6.5 trillion VND from bond issuance including 1.2 trillion VNDfrom Asia Commercial Bank Securities (ACBS),1.5 trillion VND from Saigon - Hanoi Securities JSC (SHS) and 1.1 trillion VND from VietCapital Securities JSC (VCSC).
Asanother channel, securities companies have taken loans out with foreignorganisations. Recently, HSC signed an unsecured loan contract worth 44 millionUSD or more than 1 trillion VND with a group of seven Taiwanese financialinstitutions, led by First Commercial Bank (FCB).
Earlierin March and April, VietinBank Securities (CTS) signed loan packages with atotal value of 90 million USD (more than 2 trillion VND) from a group of Koreanand Taiwanese banks.
Thetotal value of loans that securities companies have taken since the beginningof the year through bonds and unsecured loans is thought to be nearly 10trillion VND.
Alongwith bonds, securities companies have issued shares to meet capital needs forbusiness activities and increase equity, enabling them to offer more in loansto their customers.
Accordingto current regulations, securities companies were only allowed to lend out amaximum value of two times their equity, but by the end of the first quarter of2021, many securities companies had almost reached the maximum lendingthreshold. Therefore, the issuance of shares is considered vital for thecompetitiveness of securities companies.
Aseries of large securities companies such as VNDirect, MBS, HSB, VCSC have allincreased their capital by trillions of VND from share issuance while some small securities companies have plans toraise capital such as Pinetree, Dai Nam (DNSE), Da Nang (DNSC) and Everest(EVS) to strengthen their financial capacity.
Withmargin lending interest rates between 12 and 14 percent annually,securities companies that often borrow at a rate of about 8 percentcould earn a large profit from lending activities.
Onthe stock market, shares of securities firms have gained, with winnersincluding Vietinbank Securities Co (CTS), Bankfor Investment & Development of Vietnam Securities Company (BSI), MB Securities JSC (MBS), Ho Chi Minh City SecuritiesCorporation (HCM), SSISecurities Corporation (SSI) and SacombankSecurities Company (SBS).
Asof market closing on May 17, most securities stocks have grown by tens of percentsince the beginning of the year./.
VNA
