In Vietnam, the scale of a leverage is maintained as a secret, to avoid a serious crisis should the scale be too large. However, the size of a loan can be estimated on the basis of final financial statements. For example, at the end of December 2020, the financial statements of securities companies showed that the marginal loan balance was about VND 81,000 bn. Another sign is the need to increase capital as well as borrowings from securities companies through bonds or direct borrowing. By the end of 2020, securities companies increased their borrowing amounts. For instance, SSI released US$ 85 mn from foreign banks and VCSC issued VND 1,200 bn in bonds.
Capital raising was a hot activity before the 2021 shareholders meeting of some securities companies. VNDirect closed its 1:1 issuance plan to raise capital for this year; HSC also plans to issue 152.5 million additional shares; and VCSC will issue 166.5 million shares. The goal of raising capital to expand margin lending capacity is in the plan submitted to shareholders of securities companies. The reason is not just the need for more capital, but also to extend lending limits, because the current regulations only allow securities companies to lend within two times their equity.
In addition, by using mobilized capital or equity capital to lend, securities companies recently created a new playing field in launching business cooperation services for customers having idle money in their accounts. The fact is that many investors have large capital but do not always use all their cash. The cash balance on the account enjoys demand interest rates, but almost no one cares. If investors cooperate with securities companies to use that idle capital to lend to other investors, they enjoy higher interest rates, usually equivalent to a six-month term deposit interest rate in the bank.
This indirect method is used by securities companies to borrow from customers as an investment with low interest rate, then further lend to other customers at a higher interest rate. As investors still have need to use money to buy securities, so the company splits it into flexible terms, even in multiples of cycles or by months, so both the lender and the borrower are at ease with the terms.
The creation of capital mobilization channels to indulge new investors has an advantage in borrowing costs becoming cheaper. Securities companies can launch packages to support low-interest leverage, even super preferential packages at only 6% per year interest rate for a six-month period. Now, with low interest rates being offered, resources on the stock market not only come from new cash flow that F0 investors can pour back in, but also resonate with thirst to use more loans, which are all too easy and cheap and accessible.