In early September, SSI Securities Corporation announced plans to sell 415.5 million shares to existing shareholders, raising its capital from 20,779 billion to nearly 25,000 billion VND, leading the industry. With a selling price of 15,000 VND per share, SSI expects to raise about 6,200 billion VND. This capital will be used to supplement margin lending, and invest in bonds and certificates of deposit.

SSI is not alone. Many large firms in the industry have also announced capital raising plans this year. Techcom Securities (TCBS) recently completed its initial public offering (IPO) of 231.1 million shares at a price of 46,800 VND per share. Its charter capital will increase to 23,133 billion VND after the IPO, with expected proceeds of 10,817 billion VND. About 70% of the proceeds will be used for proprietary trading (stocks and bonds), and 30% for margin lending.

VPBank Securities (VPBankS) is also planning an IPO, aiming to offer 375 million shares, equivalent to 25% of its current capital, with a minimum price of 12,130 VND per share. The company's charter capital is expected to increase from 15,000 billion VND to 18,750 billion VND.

In addition to the above, VPS, HSC, Kafi, TPS, MBS, and TVS are also planning to issue hundreds of millions of shares in the coming period.

Brokerage firms are planning to raise capital to strengthen their resources and expand their core businesses, in anticipation of a potential market upgrade in October. Nguyen Trong Dinh Tam, Deputy Director of ASEAN Securities Analysis, told VnExpress that issuing more shares will give firms more room for margin lending and proprietary trading in a favorable market.

The VN-Index, Vietnam's benchmark stock market index, has increased by nearly 33% in 9 months, closing at nearly 1,671 points on 16/9. Market liquidity since early August has reached over 39,000 billion VND per session, equivalent to 1.5 billion USD, the highest ever, indicating strong investor interest.

Nguyen Anh Duc, Managing Director of Institutional Brokerage and Investment Advisory at SBB Securities (SBBS), agrees, stating that investor demand for margin increases as the market rises.

According to regulations, outstanding loans of brokerage firms in Vietnam cannot exceed twice their equity. Currently, many large firms have exceeded this limit. Some, such as HSC, Mirae Asset, KIS, Kaffi, and FTS, are almost at their limit. Therefore, these businesses are forced to raise more capital to create more lending capacity.

In addition to margin lending, Duc says brokerage firms need capital to provide new products when the market is upgraded, such as prefund services for foreign investors. Prefund is the act of setting aside money or other assets to meet a future financial obligation or transaction.

Expanding into new business areas, such as digital assets, is another reason why brokerage firms need to increase capital. The SBBS expert said many businesses are interested in the digital asset market after it was legalized. He assessed that this is a potential business area, but participating businesses need large capital.

Vietnam will pilot the digital asset market for 5 years, according to Government Resolution 5. Businesses wanting to operate a digital asset exchange must have a minimum capital of 10,000 billion VND, of which at least 35% must be held by at least two organizations: banks, securities companies, fund managers, insurance companies, or technology companies. Thus, the capital a business needs when participating in this field is three times that of a bank and 33 times that of an airline.

Many brokerage firms have taken the first step toward opportunities in the digital asset business. Three years ago, SSI established a subsidiary, SSI Digital Technology (SSID), with a charter capital of 300 billion VND, aiming to develop a digital financial services ecosystem.

In early August, TCBS invested in Techcom Digital Asset Exchange (TCEX). VIX Securities also invested 150 billion VND in VIX Digital Asset Exchange (VIXEX). VPBankS also plans to join this race, according to its recently announced business plan to 2030.

Brokers advising investors at a securities company in District 1 (TP HCM), 10/2024. Photo: An Khuong

Brokers advising investors at a securities company in District 1 (TP HCM), 10/2024. Photo: An Khuong

However, this surge in capital raising also carries potential risks. According to Nguyen Anh Duc, brokerage firms are increasing their capital to anticipate market trends and for long-term vision, but if the market stagnates and investor demand for margin decreases, they will have excess capital. This can lead to a decrease in return on equity (ROE), a key measure of profitability, negatively impacting the share prices of brokerage firms, according to the SBBS expert.

There was a period of aggressive capital raising by brokerage firms in 2021-2022. Nguyen The Minh, Director of Retail Research and Client Development at Yuanta Securities Vietnam, said that after this "hot" period, the ROE of many securities companies decreased in the following two years as the market cooled down. He cited examples like SSI's ROE decreasing from 19% (in 2021) to 10% (2023) and VNDirect's ROE from 24% (in 2021) to 12% in the following two years.

Besides ROE, according to Nguyen Anh Duc, issuing new shares to increase charter capital also means an increase in the number of outstanding shares in the market. This leads to share dilution, meaning the ownership ratio and earnings per share (EPS) of existing shareholders decrease.

The Minh also believes that as the number of shares increases, the EPS of these companies will decrease in the short term. Consequently, securities stocks will be less attractive to investors. "This will create growth pressure for securities companies," Minh said.

Regarding the potential of securities stocks, Duc expressed optimism in the medium and long term, looking at the industry's price-to-book (P/B) ratio, which indicates the market's expectation for growth and the potential of the businesses. "The average industry P/B is currently around 2.2 times, lower than the peak of 3 times recorded in 2021. Therefore, the securities sector still has room to grow," Anh Duc said.

Similarly, Nguyen Trong Dinh Tam also believes that securities stocks have strong growth potential until 2026, driven by the expectation of a market upgrade, which will help businesses in the industry increase their customer base in the future, especially foreign investors.

Vietnam aims to be upgraded from a frontier market to a secondary emerging market by FTSE Russell in 2025. FTSE Russell is a provider of market indices, data, and analytics. During a meeting with the London Stock Exchange (LSE) on 15/9, Finance Minister Nguyen Van Thang said Vietnam has made efforts and met FTSE's upgrade criteria.

Trong Hieu