The Vietnamese stock market witnessed a turbulent year in 2022. In the last quarter of 2022, the market plunged and hit a two-year low of below 900 points in the middle of last November.
The quick and strong recovery helped the VN-Index recoup the majority of its losses before being corrected, and it ended the quarter with an 11 per cent drop.
After a slight gain in the third quarter of last year, the whole market's outstanding loan balance posted a significant decrease in the fourth quarter. According to estimations, as of the end of 2022, outstanding loan balance of securities firms was VND120 trillion (US$5 billion), a decline of VND40 trillion over the previous quarter. The amount excluded triparty loans.
Of the outstanding loan balance, margin lending accounted for around VND115 trillion, while the rest was cash advances. Margin balance of the whole market was estimated to fell about VND40 trillion over the previous quarter.
After peaking in the first quarter of last year, the market's margin balance tended to fall after a force-sale wave. On the other hand, many securities firms also raised capital dramatically in the past year.
Therefore, the margin to equity ratio at most securities was below 1x at the end of 2022 instead of approximately 2x (the maximum prescribed level) as of March 31, 2022. This means that securities companies still have room to lend, and the pressure to raise capital is no longer as urgent as it was a year ago.
Foreign securities companies have been competing with and even surpassing domestic enterprises in some aspects. For example, in the lending race, Mirae Asset has been leading for many quarters in terms of outstanding loans, while KIS and KB Securities were also in the top list.
While most domestic securities companies saw sharp decreases in outstanding loans, according to statistics in the fourth quarter of last year, foreign ones still maintained stable lending activities.
Lending activities shrank due to unfavorable movements in the general market.
With great financial potential, foreign securities companies are ready to raise capital and cause great competitive pressure in all aspects, from service quality to the number of branches and especially in the ability to provide loan services.
The huge development potential of the Vietnamese stock market is expected to continue to push the group of foreign securities companies to spend money to gain market share, and if there are no more breakthrough changes, it is likely that domestic securities companies will be lagging behind. —VNS