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HCMC banks promote lending against shares as market rises
The recent recovery of the local securities market has encouraged many commercial banks in HCM City to advance loans against share certificates for investment in the stock market.
Securities companies have reported an increase in new accounts and an influx of money into existing accounts, with investor optimism growing on initial signs seen of a domestic stock market recovery. Independent market watchdogs also predict the domestic shares market may continue its increase during the next several sessions.
On Monday, the VN-Index posted an impressive gain of 4.6 per cent to end the trading session at 340.01 with a trading volume of 24.3 million shares at total value of VND599.3 billion (US$35.2 million). A day later, the index hit 347.07, up 7.06 points or 2.07 per cent over the previous session. The trading-volume hit a record 47.95 million shares on a turnover of nearly VND1.26 trillion ($70 million).
The result is that the number of investors taking loans against their shares has increased two or three times higher than the figure recorded in previous months.
Given the positive changes in the securities markets, many local banks do not want to miss out on the opportunity to make further profits by promoting loans against shares.
Director of the HCM City Housing Development Joint Stock Bank (HDBank), Nguyen Huu Dang, said providing loans against shares was a popular service in the banking market and in line with current laws.
HDBank has set aside VND400 billion to provide the service, he added.
Nguyen Hoang Long, Acting General Director of the Au Viet Securities Company, said local banks were already offering loans against shares, but this service had cooled because the stock market was sluggish.
To avoid risks, local banks applied several strict regulations for granting such loans.
Since March, the stock market had shown signs of recovery and the number of people wanting loans against shares had increased, and at the same time, banks had also relaxed conditions for such loans, Long said.
Following the trend, the Au Viet Securities Company, in co-operation with the Viet Nam Agriculture and Rural Development Bank and the Viet Nam Investment and Development Bank, intensified the provision of credit based on shareholdings.
The two banks will provide stock market investors with loans equivalent to 40 per cent of the market price of shares at interest rates of between 0.833 and 0.875 per cent per month, or 10 and 10.5 per cent per year.
Share certificates that can be used as collateral are mainly those listed on both Ha Noi and HCMC stock exchanges.
Tran Xuan Huy, General Director of the Sai Gon Thuong Tin Commercial Joint Stock Bank, said his bank was also actively lending against shares, while strictly controlling credit risks.
The Asia Commercial Joint Stock Bank (ACB) provided share pledge loans as well as personal loans for consumption, said General Director Ly Xuan Hai.
Hai said the bank was more cautious when lending against shareholdings because the securities market has just begun recovering.
All the banks that had resumed this service area were also being more careful than in the past.
The Viet Nam Export-Import Commercial Joint Stock Bank had decided to allow loans equivalent to or less than 30 per cent of the market value of shares.
Meanwhile, industry insiders have advised investors to be careful when borrowing from banks in order to trade in shares, since the business still carries a high risk.
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