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Who are the big guys that back securities companies?
It has been ‘fashionable’ for economic groups and general corporations to make investment in many business fields, especially in the finance sector and the stock market. However, a report has revealed that most of the investments in unfamiliar business fields are risky.
The report released by the Supervision Delegation under the National Assembly’s Steering Committee showed that a general corporation made investment in 37 securities companies and fund management companies, while the main business fields of the corporation are printing and making packages. Another general corporation has been found as having a very low capital adequacy ratio, but has still made capital contributions to three securities companies.
The report has pointed out that most of the capital contributions to the finance sector (banks, securities companies, investment funds, insurance companies ) were made in 2007 and 2008, the years when the market was very hot.
Nearly 50 groups and general corporations have invested in the finance sector with the total investment capital in the sector reaching 20,000 billion dong by the end of 2008. Some 70 percent of the capital has been poured into credit institutions, 10 percent in securities companies, while the remaining capital has been invested in insurance companies, investment funds or fund management companies.
Regarding investment efficiency, the report showed that by December 31, 2008, most investment funds had seen their net asset values down by 40-60 percent. Most economic groups and general corporations have been found as making no profit from securities investments and capital contributions to investment funds. There was a corporation which made such heavy investment in stocks that it had to make a provision of several trillion dong in 2008 against stock price decreases.
The report said that many economic groups and general corporations still throw big sums of money into the finance sector, while they themselves lack money to invest in important projects assigned by the state.
What is behind the investments?
More than 60 securities companies and more than 20 fund management companies were licenced in the second half of 2007. Many companies stated at the opening ceremonies that they would obtain a 100 percent growth rate per annum and attain 10-15 percent of the market share after one year of operation.
Some companies started business with the capital of less than 100 billion dong, but committed to increase the capital to several trillion dong just after one year. The bullish stock market at that time was the reason that both capital contributors (economic groups and general corporations) and capital receivers (securities companies) believed in their ability to reach the outrageous targets.
However, the report by the HCM City Stock Exchange showed a gloomy picture of securities companies’ operations. Thirty out of nearly 100 securities companies have less than 1,000 investor accounts, and many of them have been operating with less than 100 accounts.
A lot of problems have arisen over the last two years, since the 60 securities companies and 20 fund management companies were set up. A company belonging to one of the biggest groups in Vietnam remains incapable enough in terms of technology to connect online with the stock exchange. Another company was dissolved (Thien Phu), and another one had to transfer clients to another one (Gia Anh).
Statistics showed that only 1/5 of fund management companies can raise funds, which means that they are able to operate, after they are established.
VietNamNet, DTCK
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