VietNamNet Bridge – Only 1/3 of the operational
securities companies would survive after the restructuring process initiated by
the State Securities Commission (SSC), which plans to set up stricter
requirements on the companies.
According to SSC, a securities company would be
forced to stop operation if it is put under the special supervision for six
consecutive months, and its accumulative loss is equal to 50 percent of their
chartered capital.
Big
loss, weak liquidity – the diseases of securities companies
In September 2011, investors tried to run away from
SME Securities Company because they thought that the company could not satisfy
their remittance and money withdrawal transactions. After that, the Vietnam
Securities Depository Center (VSD) released the decision to suspend the custody
of the company for one month in late 2011.
At the same time, Trang An Securities Company (TAS)
also received a warning from VSD because of the incapability for securities
transaction payment. Meanwhile, TAS reportedly owed 7 billion dong to VSD’s
payment support fund.
TAS’ General Director Le Ho Khoi then admitted that
TAS fell into the inability to pay because of the problems in the investors’
money remittance management.
Falling into insolvency has become the common
problem of many other securities companies, which have repeatedly reported loss
and their stockholder equity has dropped dramatically.
According to Pham Hong Son, a senior official of the
State Securities Commission, the stock market showed more optimistic signs in
the first quarter of 2012 in comparison with 2011.
However, the competition is getting stiffer. The 10
leading securities companies are holding 60 percent of the market shares.
Meanwhile, other small companies, which are running out of money and do not
have market share, would have to leave the market.
In the first quarter of 2012, four securities
companies stopped providing brokerage services. This means that the companies
would stop operation. “The move shows that the companies have realized that
they are unfit to the games and they need to look for another way to follow,”
Son said.
Also according to Son, in the last month, SSC has
invited presidents, general directors and chief accountants of 40 securities
companies to SSC’s head office for working sessions.
SSC is likely to make public the names of the
securities companies put under the special supervision in some days in order to
protect the investors’ interests.
According to Vu Thi Kim Lien, Deputy Chair of SSC,
40 out of the 105 operational securities companies are facing liquidity
problems and do not meet the financial safety indexes, while 71 companies have
reported loss due to the ineffective investments and the stock price decreases.
Four investment fund management companies have been
found as having the loss of over 50 percent of the chartered capital.
Meanwhile, 23/47 fund management companies have reported loss.
The
restructuring process would eliminate 2/3 of companies
SSC has informed that it is compiling the new
regulations which would govern the stock market. The Decision No. 27 on the
organization and operation of securities companies relating to risk management
would be amended. The commission would also consider the issues relating to the
money management, build up the regulations on risk management in accordance
with the international practice.
The watchdog agency has predicted that after the
restructuring process, only 1/3 of the existing companies would survive.
When asked if there would be a wave of merging
securities companies, Son said that the wave may not occur because of the
specific characteristics. Unlike commercial banks, which have branches and
clients, securities companies running out of money, do not have clients--while
the technologies are poor, i.e. there are not enough necessary conditions for
the merger.
Khanh Huyen
Business & Investment Opportunities
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