Securities firms seek margin lending funds

Last update: 18:03 | 10/01/2018

Many securities companies have opted to issue corporate bonds to raise capital to finance their margin lending service, following upbeat forecasts for the market in 2018.


Checking and supervising of electronic bond bidding at the Hanoi Stock Exchange.

Vietnam’s benchmark VN-Index closed 2017 at over 984 points, a rise of 48 percent over the end of 2016. The local securities market value reached about 3.36 quadrillion VND (147.4 billion USD), equivalent to more than 74 percent 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 1.2 trillion VND in 2018 at the rate of 4 percent 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 800 billion VND 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 percent per year.

Earlier in October, Tan Viet Securities Inc (TVSI) also offered corporate bonds worth 150 billion VND to investors with an attractive interest rate of 9 percent 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 percent.

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 36.16 trillion VND (1.6 billion USD), up 22 percent year-on-year.

Five firms with loans of over 1 trillion VND 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 25 trillion VND (1.1 billion USD).

The three biggest firms were SSI with equity capital of over 8.9 trillion VND, followed by HCM Securities Co and Viet Capital Securities with equity of over 2.6 trillion VND each.- VNA

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