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Tighter lending choking stock market, say analysts
Government restrictions on commercial bank lending against securities collateral choked off a source of capital for securities investment and caused market volumes and share values on the domestic stock market to slump significantly recently, said the director of analysis at Au Viet Securities Co, Le Anh Thi.
The tighter control on credit began a month ago, when the State Securities Commission required brokerages to stop implementing new repo contracts and the State Bank of Viet Nam began auditing bank loans. (A repurchase or "repo" agreement is a sale of securities under an agreement to repurchase those securities at a specified date with a payment of interest.)
Since the move, stock-trading volumes had fallen from VND2-3 trillion (US$112-168 million) a month ago to below VND1 trillion (US$$56 million) per day lately, Thi noted. New capital flows into the market had stalled, resulting in a lower demand for newly listed shares, he said.
"Newcomers, despite their high profiles, have still been swept up in the downward trend, including Bao Viet Holdings, Vietcombank and Vietinbank," Thi said. "This has exacerbated negative market sentiment."
He said that available sources of credit were very important and would give the market an opportunity to improve. Meanwhile, he urged investors to carefully consider before unloading their holdings at this time.
Viet Nam Banking Association general secretary Duong Thu Huong said that the sluggish market was not solely due to tighter credit. Regulators were simply aiming to adjust credit structures to suit economic conditions, Huong said, adding, "Enterprises and individuals who qualify for bank loans can still access credit, even in hot areas like securities and real estate."
Thi also admitted that other factors might be contributing to a slower market, including unsurprising second-quarter earnings reports.
Lending that finance securities investment has gone up 28.3 per cent since the end of last year, according to the State Bank of Viet Nam. Bao Viet Securities Co estimated the value of outstanding loans in this area at about VND8.8 trillion ($494.4 million).
Bao Viet Securities analysts said the figure was "not very significant" compared with market trading values over the past few months, especially in late May and early June when the market saw days with trading values exceeding VND4 trillion ($245 million).
In other words, the market could not be significantly affected if this source of capital were removed, they said.
The figure also amounted to only a fraction of what was allowed under lawful lending limits, they noted, refering to a Government regulation that allowed loans against securities collateral to reach up to 20 per cent of a bank’s equity.
It was even more insignificant for top banks such as Asia Commercial Bank, Sacombank and Eximbank, they said.
The Viet Nam Association of Financial Investors (VAFI) said the current situation was stable and sustainable, easing the pressure from a possible sell-off by banks of stocks held as collateral for loans, as happened in 2008.
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