Margin lending reaches $806 million in 10 months

Nov 10th at 13:24

10-11-2014 13:24:14+07:00

Margin lending reached more than VND17 trillion (US$805.7 million) in the first 10 months of 2014, an increase of about 13 per cent over the nine-month figure.

Pham Hong Son, head of the State Securities Commission (SSC)'s Securities Business Management Department, told local online VnEconomy that the figures were based on reports that securities companies sent to the SSC.

This is one of the few times the SSC has published margin lending figures. Previous estimates were informal and often based on financial statements of securities companies which have different margin lending data. The official publication of this data is expected to help reduce the impact of inflated information on the market.

Son said the of current margin lending was not risky for the market if compared with the total capital of all securities companies, estimated to be about VND36 trillion ($1.7 billion).

He added that financial leverage had grown by an average of 10 per cent since July.

According to the SSC's regulation, the lending margin of a securities company cannot exceed 200 per cent of its equity capital. Current margin loans accounted for only 47.2 per cent of their total equity.

However, market insiders say this is the "facade" figure shown on companies' financial statements, and the real number could be bigger. Margin lending can also come from banks, where investors have collateral.

It is estimated that the figure on current margin loans is only eight per cent of total lending by securities companies.

The current margin is not big, but according to some analysts, the fact that margin loans have focused on several large-cap shares could still make it a volatile factor in case securities companies make margin calls when the market tumbles too deeply.

There are nearly 700 stocks trading on the stock market, but the number of codes eligible for margin lending is about 150. These stocks are also the darling of foreign investors, thus erratic performance of these stocks will likely make the market volatile.

Margin trading is expected to increase towards the end of this year with the forecast of a positive market outlook.

bizhub