In the first five months of the year, one third of the 30 largest securities companies in the domestic market have announced plans to increase their capital by a total value of around VNĐ38 trillion (US$1.5 billion) over the next 12 months, a report from Vietnam Investment Credit Rating JSC (VIS Rating) showed.

 

The capital raising plans are significant and are expected to boost the total equity of these companies by around 20 per cent. With the additional capital, the firms will be able to accelerate their core business activities of investment and margin lending in 2024.

 

"The higher profitability that is expected from these business expansions will help strengthen the companies' risk buffers," VIS Rating said.

 

The capital increase plans are primarily from large domestic securities firms, such as Hồ Chí Minh City Securities Corporation (HCM), SSI Securities Corporation (SSI), Vietcap Securities JSC (VCI) and VNDirect Securities Corporation (VND), as well as companies affiliated with banks like ACB Securities (ACBS), MB Securities (MBS), Tiên Phong Securities Corporation (ORS) and Saigon - Hanoi Securities (SHS).

 

These enterprises have set an average profit growth target of 30 per cent for 2024 compared to the previous year. The projected growth is mainly driven by the expansion of their core investment and margin lending operations, along with an overall improvement in industry business conditions.

 

According to VIS Rating, the low interest rates and improved investor sentiment in both the stock and corporate bond markets are expected to encourage more trading activities by investors.

 

In the first five months, average daily stock trading value increased 36 per cent from 2023 to VNĐ24 trillion. Industry return on average assets (ROAA) rose from 4.3 per cent in 2023 to 5.3 per cent in the first quarter, driven by growth in investments and margin lending.

 

The regulator's plans to upgrade trading infrastructure and remove foreign investor margin requirements are factors expected to attract new investors.

 

Among ten companies raising capital, four securities firms - ACBS, DNSE Securities JSC (DNSE), HCM and KAFI Securities Corporation (KAFI) - completed the raising plans.

 

ACBS, a 100 per cent Asia Commercial Joint Stock Bank (ACB) subsidiary, has become an important contributor to ACB's growth strategy, while DNSE will use funds to enhance IT and develop financial tech like robo-advisory.

 

VCI previously announced plans to focus more on individual investors. For HCM and MBS, extra capital will allow continued growth while keeping margin lending below 200 per cent of equity.

 

The additional capital will strengthen risk absorption for companies with large bond and stock portfolios, such as ORS, SHS, VIX Securities and VND.

 

VIS Rating also said that the pace of capital raising by foreign securities firms has decelerated over the past two years. In fact, growth of these foreign companies has trailed that of their domestic counterparts.

 

For example, the margin lending balances of foreign brokerages increased by just 18 per cent annually in the recent two-year period, far below the 35 per cent growth seen at local firms.

 

Additionally, foreign securities companies tend to have smaller investment portfolios compared to domestic peers. As a result, their ROAA was 3.7 per cent from 2020-2023, significantly lower than the 6 per cent ROAA achieved by Vietnamese securities firms during that time. — VNS