Margin lending at Vietnam brokers hits new high, room remains ample

Outstanding margin loans at brokerage houses in Vietnam had risen to a record high of an estimated VND195 trillion ($7.66 billion) at the end of March.

The figure increased by VND23 trillion ($904 million) against end-2023 and surpassed the previous peak set in early 2022 when the benchmark VN-Index topped a historic high of 1,500 points, according to a report by leading broker Saigon Securities Inc. (SSI).

Data from FiinTrade, a stock trading platform designed by financial data provider FiinGroup, also showed that margin lending at 48 securities companies reached a combined VND191.3 trillion ($7.52 billion) at end-March, rising 60.8% year-on-year and 10.3% against end-2023.

The biggest margin lenders were Techcombank Securities, SSI, VPBank Securities, VNDirect Securities, Saigon Hanoi Securities, and ACB Securities.

The SSI report highlighted that owner’s equity at the studied brokerage houses increased by VND16 trillion ($628.8 million) against end-2023 to a combined VDN235 trillion as of end-March.

This translated to a margin loan-to-equity ratio of 83%, the highest in the past six quarters.

Under Vietnamese law, this ratio must not exceed 200%. Therefore, theoretically, securities companies are eligible to lend another VDN277 trillion ($10.89 billion).

Meanwhile, FiinTrade estimated the room left for additional margin loans at VND297.65 trillion ($11.7 billion).

In anticipation of the potential stock market status upgrade, when pre-funding is not required for foreign investors, local securities companies have plans to raise their charter capital in 2024-2025 to meet their clients’ financial demands.

Among them, Vietcap Securities plans to sell 143.6 million shares via private placements, while MB Securities plans to offer 109.4 million shares to existing shareholders.

Notably, SSI has plans to issue 453 million shares, including 302 million bonus shares and 151 million shares via equity financing. If successful, its charter capital will increase to VND19.65 trillion ($772 million), the highest among its local peers.

According to SSI researchers, raising capital bases will help local securities companies to boost margin lending as well as maintain sound balance sheets.

Although the margin loan-to-equity ratio is high, it is unlikely that the massive margin calls witnessed at end-2022 will reoccur, the researchers added.