Cash flow into securities market kept low

12-Jan-2019 Intellasia | Dau tu Chung khoan | 6:00 AM Print This Post

By the end of 2018, margin lending balance was at 44.2 trillion dong, nearly six trillion dong higher than at the end of 2017.

In the recent issue of the Dau Tu Chung Khoan, securities expert Le Anh Tuan shared that loans on the stock market are at the lowest level in two years and this is one of the factors indicating that the stock will not fall further. So, what is the current status of margin loan cash flows in Vietnam stock market?

Marin lending on capitalisation only reached 1.5 percent

According to the State Securities Commission, by the end of 2018, margin lending balance was at 44.2 trillion dong, 10 percent lower than the time when the VN Index peaked on 20th April 2018 at 48.5 trillion dong, but increased nearly six trillion dong compared to the end of 2017, equivalent to an increase of 14.68 percent.

This rate is slightly higher than the increase in the capitalisation of companies listed on Hanoi and Ho Chi Minh Stock Exchange in the same period (about 12 percent).

Increase in both absolute and relative value on market capitalisation, so why are big investors optimistic about the current lending level of the securities sector?

First of all, optimism lies in lending rates on market capitalisation. On the capitalisation scale of two official exchanges (qualified for margin trading loans), the margin lending rate is currently only equal to 1.5 percent. Meanwhile, from 2018 until now, a series of listed stocks have been allowed to make additional margin trading such as VHM, VRE, TCB, VPB, HDB, VJC, etc., which are all stocks with large capitalisation and high liquidity.

The addition of large-cap stocks with high liquidity to the “basket” for margin lending, creating a huge room for new loans of securities companies.

“In the previous periods, it was difficult to manage the risk of lending for margin trading of stocks since the number of stocks that met the criteria such as high liquidity, high demand for loans and good fundamental at the same time, were not so many.

Now with the new stock codes, it may be easier for securities companies to complete the lending target, but not too dependent on a few securities codes,” said a director of a securities company.

Lending for securities investment decreases: variables for margin race in 2019

If looking at margin lending data of securities companies, investors can see an increase in securities credit through absolute numbers.

However, at a wider perspective, including other sources of loans such as disbursement contracts from third parties (stock repo funds), other direct and indirect bank loans for securities investment purpose, the loan capital on the stock market actually decreased significantly.

This reduction has not been estimated, but a report sent by a customer report by an independent organisation states that this organisation had surveyed from securities companies and analysed data of securities investment loans and consumer loans of commercial banks.

The result was quite impressive: in the second half of 2018, borrowing from third parties with supervision and blockade accounts services from large securities companies has narrowed quite a lot, since big investors are more cautious.

Consumer loans (especially loans for the purpose of house repairing), which are essentially loans for real estate investment and securities investment, have also decreased and accounted for a low rate in the total balance structure of credit debt of the economy.

Regarding the loan flows, developments may emerge on Vietnam stock market in 2019 which is the appearance of competitive capital from foreign securities companies. Many securities companies in this sector are planning to increase their chartered capital, taking the source from issuing shares and bonds to partners or from parent companies to serve margin trading activities in Vietnam.

The race on margin positions will be an interesting story in 2019. Investors are probably the most joyful subject if the cost of borrowing continues to decline with the Ministry of Finance has just issued a circular to remove stock exchange fees on Vietnam stock market.


Category: Stocks, Vietnam

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