Securities companies’ financial reports showed sharp increases in outstanding loans of tens of trillions of dong to VND180 trillion ($7.3 billion) in the fourth quarter 2023. Of this, margin loans accounted for a large proportion, while the remaining was advance credit.

This was the highest level of outstanding loans since the second quarter of 2022 after the VN-Index climbed to a new high and then plummeted.

The market has recovered significantly and the VN-Index is staying above 1,170 points, but is still much lower than the peak of 1,520 points in early 2022. The market capitalization value also dropped by 25 percent to $240 billion compared with the $320 billion at its peak.

Le Quang Tri from Nhat Viet Securities said the securities companies’ outstanding loans have increased because many investors returned to the market after a period of interruption. The other reason is that bank deposit interest rates are low, while the real estate market is gloomy and smart money is going to places where liquidity is higher.

In late 2023, commercial banks reported that capital was abundant but the number of loans was low. The State Bank of Vietnam (SBV) confirmed the low absorption rate of the economy.

SBV’s report showed that credit grew slowly during 2023 and the credit growth rate by the end of November was just 9 percent. In the interbank market, the overnight lending interest rate was a record low, just hovering around 0.15-0.2 percent per annum.

Lending only increased in December, helping raise the credit growth rate of 2023 to 13.71 percent, which was still lower than the 14-15 percent target.

In OMO (open market operation), SBV did not have to pump money into circulation during the year. On the contrary, it had to withdraw money from circulation from September to early November.

Idle money kept flowing into commercial banks despite continued decreases in interest rates. The capital mobilization of the banking system increased more sharply than outstanding loans.

In the first nine months of 2023, the banking system once again in the last three years witnessed an excess of deposit growth rate over lending growth rate, 5.8 percent vs 5.73 percent.

Stock market

Analysts believe that injecting money into stocks is a wise decision now, as bank deposits cannot bring desired profits and the real estate market has few transactions.

Some investors told VietNamNet that, with such low bank deposit interest rates, they would rather get margin loans and seek bluechips, especially shares of companies in banking, public investment and consumer manufacturing.

They believe that share prices will not drop sharply, and safety is high for margin loans.

The problem is that though outstanding loans have increased sharply, market liquidity has decreased and profits for securities companies have also declined.

Analysts said borrowed capital may not be used to buy stocks, leading to low liquidity and securities companies’ profit decrease. Perhaps some businesses borrow money for other purposes, such as paying principal of corporate bonds, redeeming bonds or investing in stagnant projects.

The same phenomenon occurred in late 2022 and early 2023, and it may happen again amid the large amount of mature bond value in 2024.

However, the financial health of enterprises has improved. According to HNX (Hanoi Stock Exchange), 35 real estate firms paid their debts from bonds in 2023, totaling VND20 trillion.

Meanwhile, state management agencies have increased supervision and imposed heavy sanctions on violations.

Regarding decreased profits of securities companies, analysts think the companies have eased lending interest rates to stimulate investors’ demand to buy stocks.

However, no matter what securities companies have done, analysts affirmed that cash flow is coming back.

Manh Ha