Lackluster stock market makes securities companies remain unsalable

Bad business performance has forced many securities companies to sell stakes to foreigners over the last four years. However, it is getting more and more difficult to find buyers nowadays, since foreign investors believe that it would be very difficult for them to take back the investment capital in the next several years.

Unprofitable securities companies considered low quality goods…

According to the State Securities Commission SSC, 61 securities companies out of the 105 operational companies have reported minus profits. Meanwhile, only 20 companies reported loss at the end of 2010. Especially, “big guys” also took big losses: SSI incurred the loss of over 100 billion dong, Bao Viet 80 billion and Sacombank Securities 159 billion dong.

The lackluster market in 2010 and 2011 has been cited as the main reason behind the big losses of securities companies. Securities companies have been incurring loss in trading securities, since the stock prices keep decreasing. They also cannot earn money from brokerage services, because many investors have left the gloomy market. Meanwhile, they have to pay higher for business premises, staff, and technologies.

Therefore, the information about the big losses incurred by securities companies does not surprise anyone.

The big difficulties have prompted securities companies’ owners to sell stakes to foreign investors in an effort to get more capital for operation, and seek foreign management technologies. Dinh Quang Hoan, a senior executive of Ban Viet Securities Company, said that more than 20 companies have sold stakes to foreign partners since early 2010.

The success of the deals has been explained by the fact that the sellers accepted to sell stakes at “reasonable prices” (in many deals, the sale prices were just a little higher than the face value).

Meanwhile, foreign investors hoped that they can “take a roundabout” to enter the Vietnamese market by purchasing the existing companies. If foreign investors do not buy the existing companies and want to set up new legal entities, they will have to wait until 2012. Under the WTO commitments, Vietnam will only accept the presence of 100 percent foreign invested securities companies in Vietnam from 2012.

The sellers and buyers in the above said 20 successful deals included big names such as Huong Viet Securities Company which sold 48.33 percent of stakes to Singaporean Morgan Stanley, Click & Call which sold 49 percent of stakes to South Korean Golden Bridge, and Vietnam Securities Company which sold 49 percent of stakes to Malaysian RHB.

…therefore, they are unsalable

According to Thoi bao Kinh te Saigon, no successful deal has been made over the last six months.

“Foreign investors understand well that Vietnamese market remains very small with the modest trading volume of 1 trillion dong on both the HCM City and Hanoi bourses, while there is up to 105 securities companies, therefore, the pieces of the cake for everyone would not be big,” A director of a securities company said, adding that foreigners now hesitate to spend money to buy Vietnamese companies.

Chair of a Hanoi-based small securities company complained that he still has not found the buyer, though he advertised the sale earlier this year. “We asked information from different sources, but it seems that no one is interested in buying securities companies at this moment,” he said.

The securities company has to scale down its operation due to the heavy loss. Especially, it has closed the HCM City branch.

According to Le Dat Chi from the HCM City Economics University, there are three types of securities companies: the securities companies belonging to commercial banks, the foreign invested companies and the private run companies.

Chi said that most of the companies that plan to sell stakes to foreign investors now are private run ones, because a lot of the companies do not have good financial capability. Therefore, the companies are considered low quality products, which are not attractive in the eyes of foreign investors.

The above said general director of a securities company said that Vietnamese securities companies generally are not “good companies” at this moment because of the gloomy stock market, and foreigners understand that they would not be able to take back the investment capital just in several years.

Source: TBKTSG

Tags: vietnam stock, Vietnam stock market, VNindex