Vietnam - Only one third of securities companies can survive

Securities companies will have to suspend operations if falling into the special watch list for six consecutive months together with an accumulated loss of 50 percent on chartered capital.

In early September 2011, a number of investors withdrew from SME Securities Co as they said that this broker could not meet their transactions of money withdrawal and transfer. Then, SME had to suspend securities depository activities for the last month of 2011 as requested by Vietnam Securities Depository Centre (VSD).

At the same time, Trang An Securities Co (TAS) was also warned by VSD for its insolvency for securities transactions. TAS fell into the insolvency situation in transactions with investors, and owed VSD's Payment Support Fund more than seven billion dong.

TAS general manager, Le Ho Khoi by that time admitted the company's insolvency situation because it did not strictly manage the money transfer stage of investors.

The insolvency became a foreseen wave when many securities companies continuously posted losses and their equity was also not much. Meanwhile, according to Pham Hong Son, head of Business Management Department under the State Securities Commission (SSC) said that in comparison with 2011, the picture of the stock market in the first quarter of 2012 had more satisfactory signs.

However, the competition is increasingly fierce. With the holding of about 60 percent of the market share of the top ten securities companies, so many small-cap securities brokers that have run out of money and had no market share will have to stop operations soon.

In Q1/2012, four securities companies have applied to withdraw the securities brokerage operation. This means that these securities companies will be wiped from operations.

The move suggests that these securities brokers themselves see that they are not strong enough to continue the play so they seek other directions, Son said.

Son also added that "in the past month, we constantly invited chairmen of director board, general director and chief accountant of 40 securities companies to work".

Currently, SSC is considering announcing the first list of securities companies under the special watch to ensure the interest of customers. Accordingly, if being included in the special watch list for six straight months together with an accumulated loss of 50 percent on chartered capital, securities companies will be suspended operations.

Evaluating securities companies according to the financial security criterion, Vu Thi Kim Lien, vice chairwomen of SSC, said that there are now 40/105 securities companies facing difficulties in liquidity and they can not ensure the financial security criterion and 71 securities companies incurred losses (due to decreasing stock prices and inefficient investments).

Regarding the classification of fund management companies according to the financial security criterion, there are four unqualified fund management companies in terms of financial security criterion and suffering loss at over 50 percent on chartered capital. In addition, there are 23/47 fund management companies incurring losses.

To prepare for the restructuring process of the stock market, SSC is urgently complete the legal documents including amending the Decision No 27 on organisation and regulation of securities companies related to risk management, investment limit, restructuring, money management and building regulations on risk management for securities companies under the international norms.

Forecasts of specialists and management agencies said that there will be only about one third of securities companies to survive when regulations on securities company management are more closely.

VietBiz24

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