return icon Vietnamnet.vn

Finance Ministry to loosen credit quota for securities

Ministry of Finance’s proposal to increase the quota for credit poured into the securities sector is largely backed by market experts.

 

An employee operates a cash register at the VNDirect Securities Corporation. Credit that banks are using to finance securities companies for margin lending remains at a relatively low level. — Photo tinnhanhchungkhoan.vn

Ministry of Finance’s proposal to increase the quota for credit poured into the securities sector is largely backed by market experts.

The Ministry is studying a proposal to increase credit for securities companies for margin lending by loosen credit quota that banks are allowed to lend securities company, instead of the current regulation, which stipulates the quota doesn’t exceed 5 per cent of the bank’s chartered capital.

According to the State Securities Committee, credit that banks use to finance securities companies for margin lending remains at a relatively low level, standing around VND30.5 trillion (US$1.3 billion), accounting for only about 0.4 per cent of total outstanding loans of the commercial banking system.

If the proposal is approved, securities companies will have more money to lend investors for margin trading.

“Loosening credit quota to more than 5 per cent of the bank’s chartered capital can be considered as a measure to support all industries affected by the COVID-19 pandemic. In my opinion, this proposal is reasonable in the context that the Government has issued many stimulus packages,” said Ngo The Hien, deputy head of analysis at Sai Gon – Ha Noi Securities Company (SHS).

“Capital flows from securities companies utilised for margin lending, including both equity and bank loans, play an important role for investors and the stock market,” he told news site tinnhanhchungkhoan.vn.

“Investors' awareness of margin trading has been enhanced and the risk control system of securities companies has been improved significantly, thus the bad debt ratio arising from securities lending remains at a very low level.”

“If the proposal of the finance ministry is approved, the credit source for the stock market will be increased, thereby creating new sources of money to support investors in both the short and long term,” Hien said.

According to Huynh Anh Tuan, Deputy General Director of Everest Securities Company, the proposal to loosen credit for the securities sector is a good news for the stock market because the demand for loans from securities companies is quite large.

“But as securities is considered a risky sector, many commercial banks are hesitant to lend to them, especially when companies often do not have collateral,” Tuan said.

Reduced margin debt in the first quarter of 2020 was mainly due to market price fluctuations, investors were forced to sell, as well as a sharp decline in market capitalisation, affecting the loan.

However, the market went back up to the present level, the demand for margin increased, causing the demand for capital mobilisation of securities companies increased.

Nguyen Huu Binh, head of analysis at Vietnam Investment Securities Co said commercial banks aren’t allowed to spend more than 5 per cent of its charter capital for margin loans, which is an out-dated regulation and no longer suitable for current practice.

With the increasing size of the stock market, the demand for margin loans is rising, while raising charter capital in the short term is not an easy move for banks.

According to Le Duc Khanh, director of market strategy department at PetroVietnam Securities (PSI), in addition to the raise of credit quota, there should be solutions to boost investor participation in the market.

“For domestic investors, it is necessary to encourage them to open trading thus attracting domestic cash flow,” Khanh said.

“The new Securities Law will take effect early next year with the application of international financial reporting standards, which helps enterprises disclose information in both English and Vietnamese, supporting foreign investors to access information better.”

This can attract more foreign investors to join the stock market, Khanh said.

Declining margin loans

Margin loans have also declined in the first quarter of this year. At securities company in Q1, margin loans were estimated at VND50 trillion, down by 14 per cent year-on-year.

The highest margin loan was reported by Mirae Asset Viet Nam Securities Company with VND7.2 trillion, a decrease of 2.9 per cent year-on-year, followed by SSI Securities Corporation with VND4 trillion, down by 25 per cent against last year.

Margin trading is subjected to a number of restrictions. For example, the total margin loan at a securities company to a single customer must not exceed 3 per cent of the lender’s equity.

As the margin loan has a maximum term of three months, with an additional three-month extension. This often forces investors to sell securities to pay debt when the loan maturity expired.

It can be assumed that securities companies do not lack the resources to lend, but investors are hindered to borrow due to tight regulations.

Credit is currently poured into the securities sector mainly through two channels – the loans that securities companies take from banks for margin lending and loans that single investors borrow directly from banks.

Margin trading refers to the practice of investors borrowing money from brokerage companies to purchase securities worth more than the investors’ net asset value in their accounts. — VNS

Covid-19 changes positioning of largest securities companies in Vietnam

Covid-19 changes positioning of largest securities companies in Vietnam

The number of securities companies that saw profits decrease or took losses in Q1 were much higher than the number of companies that maintained growth.

State Securities Commission to launch one-stop information disclosure system

State Securities Commission to launch one-stop information disclosure system

The State Securities Commission (SSC) will soon launch an electronic one-stop information disclosure system for the stock market, news site tinnhanhchungkhoan reported on Thursday.

MORE NEWS

Doll collection created in honour of Mother Goddess worshipping

Inspired by Mother Goddess worshipping - a UNESCO Intangible Cultural Heritage - designer Van Anh Scarlet created a collection of figurative dolls based on the ritual, called the “Painting of the Four Palaces”.

Try some typical Muong grub

The Mường ethnic people living in Hòa Bình, Thanh Hóa or Phú Thọ share the same origin and almost the same way of living in harmony with nature.

VN food exporters turn focus to domestic market

Vietnamese are tending to consume foods of clear origin and high quality after the COVID-19 pandemic, causing many export-oriented food brands to turn their attention to the domestic market.

Stormy time for HOSE: network pending, leader disciplined

In 2021, the HCM City Stock Exchange (HOSE) reported a 21-year high profit. However, it was also the year when many problems occurred.

Facebook to register, declare and pay foreign contractor tax in Vietnam

Meta, the parent company of Facebook, on the occasion of the signing of a memorandum of understanding with the National Innovation Center (NIC), made the tax payment commitment.

Prime Minister’s ‘3-in-1’ business trip to the US

The business trip to the US of Prime Minister Pham Minh Chinh has brought important bilateral and multilateral results, according to Deputy Minister of Foreign Affairs Ha Kim Ngoc.

Corporate bond issuance drops sharply after arrest of Tan Hoang Minh chair

After the cancelation of nine corporate bond issuances of three companies related to Tan Hoang Minh, the volume of private offerings fell sharply by 33 percent to VND30 trillion in April.

Why the stock market sell-off when VN’s economy is strong?

Vietnam’s benchmark VN-Index sold off 11 per cent last week and was down 21 per cent in the year to date at the end of last week after being nearly flat until March end.

Two Vietnamese beauties among Top 50 of Miss Grand Slam 2021

Miss Grand Slam, Nguyen Thuc Thuy Tien, Miss Grand International, Nguyen Huynh Kim Duyen, Top 16 finish in Miss Universe

Vietnamese banks expected to get better credit ratings

Ratings of Vietnamese banks are expected to be continually improved thanks to Vietnam’s positive sovereign credit rating.

Vingroup completes issuing international bonds worth US$525 million

Vingroup Joint Stock Company (Vingroup) has completed its bond issuance on the international market with a total value of US$525 million, according to details given by the Hanoi Stock Exchange (HNX).

Deputy Finance Minister Nguyen Duc Chi takes charge of State Securities Commission

Minister of Finance Ho Duc Phoc had assigned Deputy Finance Minister Nguyen Duc Chi to directly take the charge of the State Securities Commission (SSC) from May 19.

Hanoi approves more than 1 billion USD for Ring Road No. 4 project

The Hanoi People's Council for the term 2021 - 2026 on May 20 agreed to spend 23.5 trillion VND (over 1 billion USD) from the city budget for the Ring Road No. 4 project.

Gov't may recall unused funds for public investment projects

Undisbursed funds for public investment projects could be recalled if local governments failed to implement the projects for an extended period of time,

VIETNAM BUSINESS NEWS MAY 20

CPTPP helps leverage Vietnam-Australia investment cooperation
back_to_top