Securities firms begin cutting margin for Duc Giang Chemical stock following chairman arrest

As DGC shares of Duc Giang Chemical Group recorded their second consecutive limit-down session on Wednesday following the detention of its chairman and other executives, securities companies have started reducing lending limits for this stock, with some even cutting margin trading.

On the Ho Chi Minh Stock Exchange (HoSE), DGC continued to face heavy selling pressure during the Wednesday trading session, hitting its floor price of VND64,000 ($2.43) per share, with tens of millions of shares queued for sale. Bottom-fishing demand remained minimal, with only a few hundred thousand shares matched.

Following the Ministry of Public Security’s noon statement, on Tuesday evening, Duc Giang Chemical Group informed that its chairman Dao Huy Huyen, who is also chairman of its Duc Giang-Lao Cai Chemical subsidiary, had been charged for three counts related to accounting violations (causing serious consequences), illegal resource exploitation, and environmental pollution.”

Several other executives were also detained, including board member and CEO Pham Van Hung and vice chairman and former CEO Dao Huy Duy Anh - Huyen’s son.

In response, some securities firms have cut margin trading for DGC shares. In its list of margin-eligible securities on Tuesday, Mirae Asset Securities removed DGC. Previously, the firm had allowed margin lending for the stock at a 45% ratio with a cut-off price of VND75,000 ($2.85).

Many securities firms have not yet cut margin for this ticker but have reduced lending ratios/limits or locked buying power to mitigate risk. An industry expert noted that legal issues involving Duc Giang’s leadership had been rumored for about three months. The stock had already plunged from VND90,000 to below VND60,000 ($2.28) per share. Even after two consecutive limit-down sessions, the stock has not yet broken its previous bottom.

Caution advised while awaiting new leadership

Duc Giang Chemical Group is a large enterprise with solid financial health and a strong position in the industry. Some opinions suggest that despite the leadership facing legal proceedings, the company can continue operating normally, potentially triggering bottom-fishing sentiment as the stock declines sharply.

However, according to a quick report by Bao Viet Securities Company (BVSC), violations by the leadership could cause DGC to lose mining rights at existing mines and face difficulties in obtaining extensions in the future. The company may also lose opportunities to participate in large-scale projects such as bauxite-aluminum projects.

This negative information raises concerns about corporate governance and compliance, directly affecting investor confidence. As a result, DGC now faces both short-term and long-term challenges.

In the short term, the lack of domestic ore supply may force the company to rely on imports at higher costs amid geopolitical volatility, increasing cost pressures and squeezing profit margins. Additionally, lower-quality imported ore could hinder P4 production, directly impacting revenue, while the stock price remains under pressure and additional legal or back-tax costs may arise.

In the long term, without resource advantages and opportunities in key projects, Duc Giang is likely to face valuation discounts and significantly reduced growth potential. This may also lead to tighter regulatory oversight across the chemical and mining sectors.

Therefore, BVSC maintains a cautious stance on the DGC stock, advising investors to wait for further assessment of the new leadership and operational stability before reconsidering investment opportunities.

The police investigation has identified a series of alleged organized violations at Duc Giang Chemical Group, including the illegal dumping of millions of tons of waste across dozens of hectares in the Tang Loong Industrial Park in Lao Cai province, causing environmental pollution and affecting local residents’ livelihoods.

Authorities also alleged the illegal extraction of hundreds of thousands of tons of apatite ore worth hundreds of billions of dong (VND100 billion = $3.8 million), along with accounting violations that concealed revenue and caused tax losses to the state budget amounting to tens of billions of dong (VND10 billion = $380,460).

Duc Giang Chemical Group traces its origin to a state-owned enterprise established in 1963. It was equitized in 2004, listed on the Hanoi Stock Exchange in 2014, and later moved to the Ho Chi Minh City Stock Exchange (HoSE) in 2020.

Under Huyen’s leadership, the company expanded from producing detergents and related materials into industrial chemicals, refined chemicals, fertilizers, and real estate.

Its charter capital has risen from VND15 billion ($570,630) at the time of equitization to nearly VND3.8 trillion ($144.45 million), with a market capitalization exceeding $1.2 billion.

According to data compiled by The Investor, Huyen and related parties hold more than 154.7 million shares, or about 40.74% of the company. Huyen himself owns nearly 69.8 million shares, equivalent to 18.38%, making him the largest shareholder. His son, Dao Huu Duy Anh, holds more than 11.5 million shares, or 3.01%.