Outstanding margin loans reach record high amidst strong equity growth

May 2nd at 13:29

02-05-2024 13:29:25+07:00

Vietnamese stock market witnesses a historic high in outstanding margin loans, accompanied by substantial equity growth at securities companies, leading to plans for capital increases amid robust market activity.

Statistics indicate that outstanding margin loans at securities companies are projected to increase by VNĐ23 trillion (US$903.7 million) compared to the end of 2023, reaching approximately VNĐ195 trillion by the end of the first quarter of 2024. This marks a historic high in Vietnamese stocks, surpassing the period in the first quarter of 2022 when the VN-Index reached its peak at 1,500 points.

Despite the surge in margin loans, securities companies have also witnessed a significant increase in equity during the first quarter of the year, driven by robust profit growth and capital raising activities. As of March 31, 2024, the total equity of the securities company group stands at approximately VNĐ235 trillion, reflecting a VNĐ16 trillion increase compared to the beginning of the year. Consequently, the Margin/Equity ratio is estimated to reach around 83 per cent by the end of 2023, the highest level in six quarters.

Regulations dictate that securities companies are not permitted to lend margin exceeding two times their equity capital concurrently. With the current Margin/Equity ratio, securities companies estimate that up to VNĐ277 trillion will be available for margin loans to investors in the near future. However, it should be noted that this is a theoretical calculation, and in reality, the Margin/Equity ratio of the overall market has never reached the 2-times threshold, even during the most active trading periods.

Examining individual securities companies, most of them still have significant room for lending, with Margin/Equity ratios mainly ranging from 100 per cent to 140 per cent. Notably, top companies in terms of equity such as Techcom Securities JSC (TCBS), SSI Securities Inc (SSI), VNDirect Securities Co (VND) and VPBank Securities (VPS) have ratios below 80 per cent. Only a few securities companies, such as HCM City Securities Corporation (HSC) and MB Securities Co (MBS), are facing relatively tight margin situations and are planning capital increases this year.

While securities companies currently do not face significant capital pressure when it comes to margin lending activities, they need to have substantial capital resources to support market upgrading processes, such as accommodating foreign investors who may not be required to deposit 100 per cent before trading in the future. Consequently, most securities companies have plans to increase capital in the 2024-2025 period. Notable names include:

Vietcap Securities Joint Stock Company (VCI) plans to offer over 143.6 million shares to both domestic and foreign investors with financial capacity and professional securities investors. The offering price will not be lower than the book value as of December 31, 2023, which is VNĐ16,849 per share. The funds raised (at least VNĐ2.42 trillion) will be used to supplement capital for margin lending activities (VNĐ2.1 trillion) and proprietary trading activities (VNĐ300 billion).

MB Securities Co (MBS) intends to offer over 109.4 million shares to existing shareholders (with a right exercise ratio of 4:1) at an offering price of VNĐ10,000 per share. Additionally, the company plans to offer a maximum of over 28.7 million shares to fewer than 30 professional securities investors, in compliance with legal regulations, to supplement resources for business activities.

SSI Securities Inc (SSI) plans to issue 453 million shares to increase its charter capital from equity capital. This includes the issuance of 302 million bonus shares at a ratio of 100:20 and the offering of 151 million shares to existing shareholders at a price of VNĐ15,000 per share and a ratio of 100:10. Upon completion, SSI's charter capital is expected to increase to VNĐ19.65 trillion, maintaining its position as the leader among securities companies in terms of charter capital.

VNDirect plans to offer nearly 244 million shares to existing shareholders at a ratio of 5:1, with an offering price of VNĐ10,000 per share. Simultaneously, a stock dividend will be paid at a rate of 5 per cent, corresponding to the issuance of nearly 61 million new shares. If both options are successful, VNDirect's charter capital will increase from VNĐ12.18 trillion to nearly VNĐ15.2 trillion. The implementation is scheduled for 2024, pending approval from the State Securities Commission (SSC).

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