Brokers suspend margin trades on bank stocks

Brokers suspend margin trades on bank stocks

In the face of increasing investor panic over the past three days as bank stocks have plummeted, several stock brokerages have halted their clients' margin trading to reduce risks.

Vietcombank Securities Co was the first brokerage to make the move, suspending lending on Wednesday to clients seeking to trade on margin in shares of Asia Commercial Bank (ACB), Eximbank (EIB), Sacombank (STB) and PetroVietnam Construction Co (PVX).

Kim Eng Securities Co shortly followed suit, excluding ACB, STB, EIB, Nam Viet Bank (NVB) and Sai Gon-Ha Noi Bank (SHB) from the list of shares eligible for buying on margin.

"Because the supply of bank stocks currently exceeds demand and prices of banking shares have fluctuated strongly, the company's department of risk management will temporarily take STB, EIB, ACB, NVB and SHB off the list of approved stocks for margin trading services," the firm worte in a message to investors.

The only listed banks unaffected are Vietcombank (VCB), Vietinbank (CTG) and Military Bank (MBB), all of which still have majority State ownership.

VNDirect Securities Co (VND) had been expected to also remove banking shares from its list of shares eligible for margin trading, but VND general director Nguyen Hoang Giang said his company was continuing to extend credit against the stocks for the time being.

ACB Securities Co, Vietinbank Securities Co (CTS), Saigon Securities Inc (SSI) and BIDV Securities Co (BIS) were still lending to margin traders at the common rate of up to 40 per cent of the value of shares.

The arrest on Tuesday of Nguyen Duc Kien, a Vietnamese billionaire with a history of deep involvement in the banking sector, sent shock waves through the nation's stock market, precipitating its steepest decline in history.

On the HCM City Stock Exchange, the benchmark VN-Index has plunged 44 points or 10.5 per cent in the past three days. On the Ha Noi Stock Exchange, the HNX-Index has given up over 9 points, or a loss of 14 per cent.

Banking shares on both exchanges have bottomed out for three days in a row despite reassurances of the liquidity of banks from State Bank of Viet Nam Governor Nguyen Van Binh, who testified before the National Assembly after the arrest.

Military Bank Securities Co analyst Hoang Cong Tuan said investors had overreacted to the news of Kien's arrest on suspicion of fraud, putting undue sell pressures on all stocks across-the-board.

"The current problem is that investors cannot determine the scope of influence that the possible fraud will have on the stock market, and it's easy to fall prey to false rumours," Tuan said.

"I think the market will continue to be negatively affected for the next few sessions," he said. "However, when the panic is over, sound and consequently undervalued stocks will have a chance to rebound."

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