Initial solutions to support investors' transactions during difficult times during the Covid-19 epidemic were given by securities companies, with the most notable one being the reduction of margin lending interest rates.
Recently, there has been a notable piece of information concerning the management solutions of the management agency for the Vietnam stock market (stock market) during the Covid-19 epidemic, which is 40 securities companies and 20 management being invited by the State Securities Commission (SSC) to attend the meeting to assess the impact of the epidemic and also to recognize solutions to overcome difficulties.
In particular, the most noticeable solutions proposed by the SSC are: expanding margin for stocks on UpCom, reducing fees, promoting electronic transactions, and holding an online general meeting of shareholders. Regarding the expansion of margin cash flow, according to SSC leaders, some stocks on UpCom have the same quality as the listed floor, so it is acceptable to open margin cash flow into these stocks.
It can be understood that only a list with a limited number of codes on UpCom will be allowed to deposit. In fact, the proposed margin lending for stocks on the UpCom has been raised for a long time with the desire to improve the liquidity of this floor, especially in the context of the increasing market capitalization of UpCom.
However, to reach this decision, it will take a certain time for the SSC to report to the Ministry of Finance. Regarding the solution to keep employees and customers safe in transactions, the SSC said that the agency supported the proposal of trading on a digital platform and enforcing trust confirmations and transactions through electronic signatures.
In order to support the public enterprises to organize a safe meeting of the shareholders, the SSC has asked the Securities Depository Center to provide strong information about the online meeting of shareholders, as well as the online voting method. This is the way that many developed stock markets have applied, but in Vietnam, public enterprises, including listed enterprises, are still not used to doing this way.
The reduction of fees is also very practical in supporting securities companies as well as investors today. The Securities Business Association has proposed reducing fees at the Ho Chi Minh Stock Exchange (HOSE) and Hanoi Stock Exchange (HNX) for securities companies from 0.03% to 0.01%, thereby supporting, thereby supporting the reduction of fees for investors.
The Association also proposed a 50% reduction in the prices of currently applied services such as the service prices for managing member transactions, for managing derivative trading members, for securities trading services, and for derivatives trading services, etc.
The service price applied at the Securities Depository Center has also been proposed to be reduced by 50% such as the price of custody member management service, the price of depository services and securities transfer, etc. It is very likely that the regulator will soon make specific decisions regarding the reduction of fees.
On the securities companies 'side, initial solutions to support investors' transactions were also introduced, with the most notable one being the reduction of margin lending interest rates. For example, Mirae Asset Vietnam Securities Company has announced the implementation of the preferential interest rate margin program from 9.5-9.9% per year, applied until the end of June 30, 2020, for customers opening margin trading accounts at the company.
AIS Securities Company has also announced to reduce the margin loan interest rate to 9% / year instead of 9.5% / year as before, and this would be applied from March 1st, 2020. Specifically, investors who use margin lending services with outstanding loans of less than 1 billion VND / day will enjoy an interest rate of 0.025% / day, equivalent to 9% / year. Earlier this week, SSI has also launched a preferential package of 2,000 billion VND with an interest rate of 9% / year.
Accordingly, in the three months from March 1st, 2020, customers who have opened accounts at SSI will have an increase in outstanding loans from securities trading transactions compared to the previous three months and new customers who generate outstanding margin during the aforementioned period will be entitled to a margin loan with an interest rate of 9% / year, with the maximum loan value of 50% of the average outstanding loan.
Recently, many securities companies, especially securities companies accounting for a large market share in the market, have had large loan outstandings for the stock mortgage, and the interest from this account has also contributed a lot to the total annual revenue. It is estimated that the interest gained from margin lending contributes 30-50% of the revenue of securities companies, so this is an important service of these units.
For example, at the end of 2019, SSI Securities Company had a total outstanding margin loan of nearly 5,400 billion VND and the interest from loans reached 678 billion VND. Or Ho Chi Minh City Securities Company (HSC) by the end of 2019 had margin loans of more than 4,681 billion VND and the revenue from margin lending activities reached 496 billion VND, which was a slight decrease of 5% compared to that in 2018, but it still accounted for 39% of the total revenue. Similarly, VnDirect Securities Company had a margin balance of nearly 2,800 billion VND at the end of 2019, which is an increase of 12.6% compared to 2018. The revenue from lending reached 432.9 billion VND, accounting for 28% of the total revenue that year.
Before the cut, the margin interest rate at most large domestic securities companies remained at 12.5-14.4% / year (corresponding to 0.035-0.04% / day), higher than the rate of 9-12.5% / year of foreign securities companies.
This difference results in an increase in the competition pressure on the brokerage market share, affecting brokerage revenue and margin lending at many domestic securities companies. In the current market context, the initiative of reducing transaction fees and reducing the margin interest of securities companies are considered necessary actions to help investors deal with difficulties as well as to contribute to holding cash flow.
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