Securities stocks lose shine for investors

Friday, Dec 13, 2019 07:52

Inside a Mirae Asset Securities Co's company. With strong financial capability, Korean investors have quickly increased their charter capital and become a formidable competitor to domestic firms. — Photo

Shares in securities companies seem to have lost their shine for investors in the face of fierce competition from foreign-invested firms.

Securities stocks are favoured by speculative investors thanks to their high liquidity. However, this group has gone quiet in the latter half of this year despite several tides on the stock market.

Shares in big companies such as Saigon Securities Inc (SSI), Ho Chi Minh Securities Corp (HCM), VNDirect Securities Co (VND), Vietinbank Securities Co (CTS) and Sai Gon-Ha Noi Securities Co (SHS) have lost 20-50 per cent of their value this year.

SSI, Viet Nam’s biggest brokerage company, plunged 26.5 per cent this year, sliding from nearly VND27,000 (US$1.16) to around VND20,000 this week.

HCM has also lost more than 50 per cent, closing Tuesday at VND22,800.

The securities business is heavily affected by market movements. In an uptrend period, companies can earn big profits from margin lending, brokerage services or self-investment activities. By contrast, they can also incur losses during a bearish market.

Despite falling from the 1,000-point landmark in November, Viet Nam’s benchmark VN-Index has increased nearly 8 per cent so far this year. However, cash inflow has been slow and affected brokerage and margin lending at securities companies, dragging on their business results.

HSC reported net profit of just VND305 billion ($13 million) in the first nine months of this year, just half recorded in the same period of last year.

Ending September, SSI’s post-tax profit had decreased 44 per cent on-year to VND644 billion. SSI is also seeking shareholders’ approval to adjust its profit and revenue targets down this year to VND1.1 trillion and VND2.95 trillion, respectively, equivalent to decreases of 35.3 per cent and 21.9 per cent.

Profits of others such as VNDirect, Sai Gon-Ha Noi and Vietcombank Securities also declined.

Besides, Vietnamese securities firms must compete with foreign-invested companies, especially those from South Korea. There are six Korean-invested securities companies operating in Viet Nam: including KIS, Mirae Asset, Pinetree (previously known as HFT), KB Securities Vietnam, Shinhan Vietnam and NH Securities VN.

With strong financial backing, Korean investors have quickly increased their charter capital and become a formidable competitor for domestic firms.

Mirae Asset Securities in September approved a plan to raise its charter capital from VND4.3 trillion to VND5.5 trillion ($237 million), which will make it the second biggest securities company in Viet Nam (after SSI which is also planning to increase charter capital to more than VND6 trillion through dividend payments).

KIS Securities also has a charter capital of nearly VND2 trillion.

After being acquired by Hanwha Investment & Securities Co Ltd, Pinetree Securities also hiked its capital by six times, from VND100 billion to VND600 billion.

Pumped by big money, margin lending at these companies has developed strongly. The outstanding value of margin loans at Mirae Asset Securities has increased to VND6.6 trillion, for the first time surpassing leading domestic securities firms – SSI with VND5.31 trillion and HSC with VND4.67 trillion.

Margin loans of other Korean companies also increased such as KIS (VND2.64 trillion), KB Securities Vietnam (VND1.8 trillion), not much inferior to large domestic firms such as VNDirect (VND2.95 trillion), Vietcombank Securities (VND2.9 trillion) and MB Securities (VND2.4 trillion).

The third-quarter top 10 biggest brokerage firms on the Ho Chi Minh and Ha Noi stock exchanges also saw the presence of Mirae Asset and KIS.

Some companies are competing with zero fee policies offered by Pinetree with free lifetime transactions or Vietnam Cyberspace Securities Technology. Vietnamese companies – AIS Securities and VPBank Securities – have also introduced zero fee transactions for new investors for a certain period of time.

In South Korea, deposit interest rates are currently low at about 1-2 per cent, so margin lending is an effective investment. Meanwhile, local securities companies struggle to borrow at low-interest rates to race to reduce fees and margin interest. — VNS

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