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Top securities firms report lower earnings in Q2 due to poor liquidity
A quiet stock market in the first half of 2019 resulted in lower quarterly earnings for some large-cap securities companies, causing their shares to decline in the past two weeks.
SSI Securities Corp (SSI), HCM City Securities Corp (HSC) and VNDirect Securities Corp (VNDS) were the three large-cap brokerage firms that reported lower earnings in the second quarter and in the first six months.
The three companies reported their profits were down 39 per cent, 26 per cent and 63 per cent year on year in the second quarter.
Since the beginning of the year, their profits respectively declined by 45 per cent, 60 per cent and 46 per cent year on year.
The three companies had the biggest market shares on the Ha Noi Stock Exchange (HNX) and Unlisted Public Company Market (UPCoM), and were among four firms with the biggest market shares on the Ho Chi Minh Stock Exchange (HoSE) in the past quarter.
The VN-Index lost 3.14 per cent at June-end compared to March-end as worries about political, geographical and economic tensions and about the global economy slowdown dampened market trading liquidity in the second quarter.
According to HoSE, trading liquidity in the first six months of 2019 was much lower than that recorded in the first half of 2018 when the market was boosted strongly to reach the all-time peak of 1,204.33 points in early April 2018.
In January-June period, average trading volume recorded in each trading day was 172.3 million shares, worth VND3.93 trillion (US$169 million). The figures were down 14.6 per cent in volume and 29.5 per cent in value compared to the same period in 2018.
The same situation also happened on the HNX in the first six months of the year when liquidity was inconsistent from one day to the other, making the average trading volume and value recorded in each trading day 30-40 per cent lower than forecasts of securities firms.
SSI predicted average trading value made each day would be VND6 trillion while HSC’s anticipation was VND6.5 trillion.
Therefore, the three companies saw their earnings from brokerage and proprietary trading activities fall sharply on a quarterly basis.
At SSI, income from brokerage and margin lending was down by VND210 billion to VND131 billion at the end of the second quarter. At HSC, brokerage income was down 45 per cent to VND126 billion.
According to SSI, the stock market in the March-May period went through strong volatility after having performed quite well in the first quarter, making investors unwilling to buy and sell assets.
SSI also reported the drop in large-cap securities firms’ earnings was caused by a sharp fall of brokerage fees and margin lending rates as smaller companies have curbed their fees and rates to much lower levels to attract clients and gain market shares.
Investors were also worried about the central bank’s tightened policy on banks’ lending towards risky sectors including real estate and securities, thus causing concern among investors about the risks they may face when trying to trade shares, according to specialist Nguyen Huu Binh.
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