Vietnam’s securities companies begin playing new game

A number of securities companies now are earning big money from corporate bonds.

It was a big surprise that a company which focused on corporate bonds in 2018 reported the second largest profit among securities companies, just after SSI, in the stock market.

Vietnam’s securities companies begin playing new game

There are no official statistics about enterprises’ methods used to issue corporate bonds. However, analysts believe that bonds were mostly issued to targeted investors and existing shareholders, rather than the public.

The coupon rate of interest hovers around 10 percent, a satisfactory rate for related parties.

However, in many cases, securities companies acted as preliminary investors who bought corporate bonds in bulk for reselling to secondary investors.

In other words, securities companies buy wholesale for retailing. The money collected from retailing is used to buy more shares at wholesale.

Analysts say the business has low risks but can bring very attractive profits. This can be seen in the profit made by leading bond trading companies.

Analysts say the business has low risks but can bring very attractive profits. This can be seen in the profit made by leading bond trading companies.

Other companies have realized that bond trade is lucrative and have begun joining the game. However, the game is not suited to all.

There are three factors that determine success – opportunity, favorable conditions and investors’ interest.

This business field had not caught companies’ attention for years, so the ‘early bird will catch the worms’. Grabbing opportunity will determine 50 percent of success.

 

As for stock brokerage service, the market leading company in 2018 held 18.7 percent of market share, and the No 2 company 11.2 percent.

Meanwhile, the leading bond broker held 81.7 percent of market share in 2018, which was 21 times higher than the second largest company, with 3.8 percent only.

Regarding the conditions needed to do business, analysts say the securities companies belonging to commercial banks have bigger advantages.

In order to retail bonds, securities companies need to have large distribution networks, but they can have networks, sale staff and clients from holding banks.

And finally, securities companies need investors’ interest in bonds. At present, investors don’t have deep knowledge about bonds, which makes it difficult for securities companies to sell products. However, this will be different if the products are introduced by holding banks. This explains why corporate bond buyers are mostly depositors at banks.

In principle, depositors feel safe when they pour money into a product which can bring stable and regular income, just like the profit they receive from deposits, bit at a higher rate. They feel secure when buying products distributed by the banks where they deposit money.

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