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Securities companies getting bogged down in losses   2011-05-18 -

There has been no sign showing that the stock market would get better in the time to come, while securities companies are believed to continue incurring heavy losses in the second quarter of the year.





The trading volumes on the bourses have been decreasing dramatically. Enterprises do not intend to list shares on the markets at this moment, while securities investors have become too tired that they do not want to inject money in stocks now. All that reasons have made securities companies miserable, forcing them struggle to survive.




Losses weakening securities companies




50 percent of the 28 securities companies which list their shares on the Hanoi and HCM City bourses reported loss for the first quarter of 2011. Meanwhile, profitable companies reported the profit decreases of 60-95 percent in comparison with the same period of the last year.




The Hai Phong Securities Company has been placed under the alert because it took a loss of 48.7 billion dong in 2010, and incurred the loss of six billion dong more in the first quarter of 2011.




The Bao Viet Securities Company continued incurring the loss of 54 billion dong in the first quarter, raising the accumulative loss until the first quarter of 2011, to 269 billion dong. Similarly, VNDirector incurred a loss of 42 billion dong in the first quarter, while SME Securities 16.5 billion dong.




The business reports all showed that the business expenses and management costs have all increased, while the turnover has been decreasing dramatically. As for some companies, the expenses were double the turnover. BVS, for example, had the turnover of 45 billion dong, while it had to spend nearly 100 billion dong on business and management costs.




Most recently, Sacombank Securities Company SBS was asked to give an explanation on share price decreases over the five consecutive trading sessions. Also, the company’s profit was modest in the first quarter of 2011 at 6.13 billion dong, down by 84 percent in comparison with the same period of the last year. The problem was that the expenses increased by 67 percent to 326 billion dong, while the management cost was 24 billion dong.




A finance expert said it will not be a surprise to him if the expenses of securities companies continue rising in the second and third quarters of the year, and the companies continue incurring losses. The stock market remains gloomy, while the bank loan interest rates are sky high;  therefore, it is easy to foresee that difficulties will still encircle securities companies.




What to do? Laying off workers, depositing money at banks




According to General Director of SJC Securities Company, Huynh Anh Tuan, there are 100 operational securities companies in the market, and each company can have a “small piece of the market cake”. Trading securities does not bring high profit to the companies, because the VN Index keeps decreasing. Very few enterprises intend to list on the bourse, this means that there are not many opportunities for the companies to provide consultant services. Meanwhile, the service of giving consultancy on share issuance also cannot find many clients.




According to Nguoi lao dong, a lot of securities companies have to scale down their business and dare not to expand production. In general, they have to cut down the workforce by 15-20 percent. Especially, some securities companies have deposited money at banks to live on deposit interest rates, instead of using the money for investment deals. Consequently, some securities companies have jumped into the real estate sector.




Kim Long Securities Company and Saigon Securities Incorporated, for example, hope to obtain attractive profits from the investments in the real estate projects in the US, hoping to take back investment capital after five years.




A new wave of merger and acquisition of securities companies has been triggered. The Vincom Securities Company has turned into Xuan Thanh Securities Company, after Vincom sold 95 percent of the stakes to a group of institutional and individual investors.




Prior to that, Gia Quyen Securities Company (EPS) was renamed as KIS Vietnam after 49 percent of the stakes were sold to a South Korean partner, or Click and Call Company became Golden Bridge Veitnam, Gia Anh Company became Hamico Securities.

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