Local brokerage firms are being smacked with larger-than-expected losses because of an ailing stock market over the past two months.
VnDirect Securities, one of the country’s top brokerage firms with nearly VND1 trillion ($48.3 million) in chartered capital, said losses were topping out at $2.9 million for the second quarter alone.
According to the firm’s general director Nguyen Hoang Giang, the stock market’s tumble in April and May had wiped a huge amount of value of the securities held by the company and had cancelled out the VND30 billion ($1.5 million) gains from its advisory business.
In the first quarter the firm posted losses of more than VND42 billion ($2.02 million).
Alongside VnDirect, several medium-scale brokerage firms are bracing for heavy losses. PetroVietnam Securities (PSI), which enjoyed profits of more than VND100 billion ($4.8 million) last year and also managed to post profits in the first quarter, said it was now slashing this year’s targeted profit because of a sharp decrease in the value of the securities it holds.
“There remain many difficulties ahead,” said PSI general director Nguyen Quang Huy.
General director of Saigon-Hanoi Securities Hoang Dinh Loi said the first six months of 2011 had been so tough that the “final result for the whole year is unlikely to be positive, even if the market recovers in the second half of the year.”
Some firms are now scaling down to combat the tough economic conditions. Measures include closure of transaction offices and branches and the shedding of employees. Au Viet Securities, which pruned its workforce last month, was now further cutting employee numbers and pushing ahead with its shift towards the advisory business, said chairman Doan Duc Vinh.
Over the past two months, the benchmark VN-Index measuring the Ho Chi Minh Stock Exchange’s performance has fallen more than 20 per cent from its late March peak.
Only a few brokerage firms which conduct little securities trading are chalking up profits at this time. MaritimeBank Securities (MS1) is one such example. Since going into business three months ago, the company has notched up profits of more than VND10 billion ($483,000), mainly on the back of its advisory business and trading cash.
Nguyen The Minh, general director of the company, said he was confident the firm would hit its profit target of VND42 billion ($2 million) for this year.
Other local brokerage firms are pinning their hopes on a slight recovery late this year, thanks to improvements in the country’s macroeconomic situation and the Ministry of Finance’s Circular 74/2011/TT-BTC which from August 1 allows investors to open multiple accounts, do margin trading, and buy and sell the same stock in a trading session.
According to Giang, the number of new trading accounts in his firm had increased since early June thanks to small investors cashing in after the market fell too far.
Minh indicated an inflow of cash had taken place early this month.
“The pressure from the May bail out is easing,” said Minh. “I expect that there will be some small rallies in stock markets until late the year in response to the regulators’ acts and macroeconomic improvements.”
By Hai Linh