Securities firms seek margin lending funds

Checking and supervising of electronic bond bidding at the Ha Noi Stock Exchange. - VNA/VNS Photo Tuan Anh

Viet Nam’s benchmark VN-Index closed 2017 at over 984 points, a rise of 48 per cent over the end of 2016. The local securities market value reached about VND3.36 quadrillion (US$147.4 billion), equivalent to more than 74 per cent of the country’s gross domestic product (GDP).

The boom on the securities market has helped brokerage companies expand their margin lending, but also illustrates that their capital growth has not caught up with investors’ borrowing demand.

To finance their lending expansion, many companies have decided to issue bonds.

Saigon Securities Inc is seeking shareholders’ approval for the issuing of a maximum 1.2 million convertible bonds worth total VND1.2 trillion in 2018 at the rate of 4 per cent per year. The bonds will likely be offered to less than 100 investors, excluding professional investors, with priority given to foreign financial institutions.

According to the company, this issue is aimed at raising capital for its operation.

In late December, HCM Securities JSC issued VND800 billion bonds to seven investors in a private placement. These one-year non-convertible and non-warranty bonds were sold at the coupon rate of 9 per cent per year.

Earlier in October, Tan Viet Securities Inc (TVSI) also offered corporate bonds worth VND150 billion to investors with an attractive interest rate of 9 per cent per year for the first three months. The rates for the following terms were equal to the 12-month saving rate of Vietcombank plus 2-2.5 per cent.

According to market observers, some other companies may follow this step in the context of higher investor demand for fix-income assets, especially when corporate bonds are offering interest rates higher than banks’ deposit rates.

Demand for margin loans is expected to rise this year because of the bright market outlook. Corporate bond issuance will help the company raise capital for their lending expansion, enhancing its competitiveness in the market.

By the end of September 2017, total margin loans of all securities companies reached more than VND36.16 trillion ($1.6 billion), up 22 per cent year-on-year.

Five firms with loans of over VND1 trillion included Saigon Securities Inc (SSI), Viet Capital Securities (VCI), MB Securities (MBS), VNDirect Securities (VND) and Viet Dragon Securities (VDS).

Meanwhile, total equity capital of the 10 biggest brokerage companies on the HCM Stock Exchange reached about VND25 trillion ($1.1 billion).

The three biggest firms were SSI with equity capital of over VND8.9 trillion, followed by HCM Securities Co and Viet Capital Securities with equity of over VND2.6 trillion each.