The
State Securities Commission (SSC) has a list of about 40 brokerages failing in
meeting the financial safety ratios, in which tens of securities brokerages in
Vietnam are facing the danger of bankruptcy, the Saigon Economic Times
reported.
While some firms are selling mortgaged assets
to withdraw debts according to their own request or banks’ order, ailing
brokerages are losing capital.
On November 16, Ministry of Finance introduced
the plan of managing foreign indirect investment capital (FII) which was the
focus point of the solution scheme for the stock market. The plan is expected
to be submitted to the government in the fourth quarter of 2011. Whether will
the plan be completed as December is coming? However, the birth of the plan is
not much meaningful because FII investors are leaving the market. It will take
a long time for golden chance of FII attraction to re-appear in Vietnam.
During the last three months, despite VN Index
moved around the lowest market range (since the end of 2009), foreign investors
have still offloaded securities for which prices of many stocks slumped to the
bottom. Divestment pressure of many funds for 2012 is heavier because they
could not liquidate the funds on mature if the market liquidity gets worse.
Even professional and experienced investors left the market without saying the
return time.
Foreign investors now own about 25-30% of the
capitalization of stock market. The more importance is that once withdrawing
capital, they will enhance offloading, which will create the big gap between
prices and corporate business indicators such as revenues, profit and operation
size. For that happening, foreigners usually shift from high price stocks to
penny shares and the downward trend of stock market is continued.
Also, some domestic funds are going to end up
operation because of operation deadline in 2012 and investors do not want to
extend the fund. A local fund’s representative said that since 2008, investors
almost have not received any dividend due to funds made loss or break-even. In
the credit-tightening context for the whole year 2012, the divestment of
capital is a suitable method.
Moreover, the market regulator said it would
issue a regulation on open funds after some delays. Once open funds are allowed
to operate, five listed close-end funds and others will change to open funds.
With this, open funds can buy back fund certificates and cancel operation to
reduce equivalent charter capital and raise NAV per fund unit whereby price of
fund certificate will come closer to NAV.
In order to buy back fund certificates, funds
must have cash through liquidating a part of share portfolio because most funds
have disbursed 100% of its capital in the stocks. If the portfolio includes
bonds, those bonds will be sold or repurchased. The liquidation of stocks, at a
certain extent, will pressure the stock market as stock portfolio in five
listed firms at this time is valued at trillions of dong. The expected tendency
that close funds will change to open funds could generate negative impacts to
the market rather than positive effect.
The matter of restructuring securities
companies is emerging, naturally which is to select strong firms namely HSC,
Kim Eng, SSI and eradicate ailing brokerages. Typically, Kim Eng does not have
self-trading, but they are operating brokerage and consulting along with the
strong support of the parent company Maybank who is planning to open a wholly
foreign invested bank in Vietnam. Kim Eng is going to issue 500 billion dong of
corporate bonds to an unnamed institution who may be Maybank. Also, HSC
dominated the brokerage market segment in the four quarters, continued employing
more human resources and expanding network. HSC has the great backup from
Dragon Capital as the biggest shareholder.
SSI placed the second rival behind so far in
the brokerage section. With the advantage of providing services to foreign
institutions, SSI can ensure the position of leading broker. Furthermore, SSI
has a cash volume of over 2 trillion dong and a cautious self-trading
portfolio.
On contrary, tens of securities firms are
facing bankruptcy danger. The SSC will narrow or stop operation of these firms
to ensure the safety of customers.
The Saigon Economic Times expected the stock
market would not go down further in November but the expectation did not
happen. The crisis on the market is taking place.
VietBiz24
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