Brokers fight to stay afloat in flat market

Stock brokerages are struggling to survive during the prolonged stagnation of the nation’s stock markets.

Unofficial data suggests that 10 out of 105 listed securities companies were in danger of insolvency, which would trigger a Ministry of Finance regulation that a securities company be placed under control if losses amount to 120-150 per cent of capital for three consecutive months.

Meanwhile, a rumour has been raging since mid-April that securities companies are awash in as much as VND11.2 trillion (US$533.3 million) worth of bad debt due to the financing of stock buy backs when prices were higher.

The head of marketing for International Royal Securities Co, Nguyen Tien Hoang, denies the rumour, however.

“Stock markets have been gloomy for a year, and securities firms have found ways to survive,” Hoang said.

Just a few small-scaled companies suffered a financing crisis as they were greedy to offer high lending rates but careless to control risk, Hoang said.

Phan Minh Tuan, deputy director of the Dragon Capital fund, said that stagnant markets had presented challenges to securities companies but that at least one brokerage in which Dragon Capital had invested was still performing well, with a profitable second quarter.

The head of market development for the State Securities Commission, Nguyen Son, said that the commission would inspect securities companies, especially unlisted firms, in an effort to prevent another case such as the one involving Ha Thanh Securities Co.

The former chairman of Ha Thanh Securities absconded and left the company with debts of VND100 billion ($4.8 million).

“We will focus on corporate governance in securities companies and force them to strictly comply with regulations on financial aquadacy ratios,” Son said.

In case the companies fell into insolvency and were unable to recover, the commission would encourage a merger with or acquisition by another firm, Son said, noticing that about 15 domestic commercial banks and 20 finance institutions already hold stakes in securities companies. – VNS

Tags: vietnam stock, Vietnam stock market, VNindex