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At least 50 private securities companies have to struggle to survive   2012-02-15 - TBKTSG

One of the tasks the Minister of Finance has told the State Securities Commission (SSC) to do right in the first quarter of 2012 is to inspect securities companies, the process of restructuring securities companies remains on… paper.

The huge loss of 2 trillion dong

The list of the securities companies incurring loss seems to lengthen every day, when more companies submit finance reports. BIDV Securities reported the loss of 208 billion dong, Bao Viet Securities 93 billion dong, SHS 380 billion dong, the Hai Phong Securities Company 95 billion dong.

If calculating the total loss incurred by the companies which have submitted finance reports, the figure would be two trillion dong. However, this is not the final figure.

The heavy losses have made the stockholder equity shrunk. Four securities companies have abandoned brokerage service. A lot of companies incurred loss because of their trading activities themselves.

Analysts have raised questions about some companies which have high cash balance by the end of the period, but have relatively big bank debts.

The debts have been explained by some companies that they are incurred by clients, while securities companies just act as the intermediaries who link clients and banks.

If so, another question has been raised that if banks are so foolish that they accept the shares as the collaterals and do not know when they should sell the shares to recover debts. To date, in lending to fund securities investments, no bank has reportedly lost capital.

Therefore, analysts say it is unbelievable the big debts of trillions of dong of clients which are shown on securities companies’ books do not have any relations to the companies themselves.

Some companies have been found as having the long term investments increasing sharply.

In principle, one needs to make provisions against the risks in long term investments. However, the majority of the companies have only made provisions against short term investment deals.

How many companies can survive?

Analysts have predicted the leave of at least tens of securities companies, and their owners. The big shareholders of the companies will not only lose money when their companies take profits. A lot of shareholders contributed capital to the companies with the money borrowed from banks. In order to be able to borrow money from banks, they had to use the securities companies’ shares as the collateral.

However, as the market share prices have fallen to the levels below the face value (more than 10 shares have the market prices of 1500-5000 dong), the shareholders have to pay in more assets to banks. In this case, the shareholders are incurring the so called “double loss.”

Of the operational securities companies, many are the companies belonging to commercial banks (banks contribute up to 11 percent of chartered capital). The companies, though having big difficulties, but would still be able to survive thanks to the parent banks.

Meanwhile, the other 50 private securities companies are likely not to survive, especially when many state owned enterprises, the main shareholders of the securities companies, are trying to withdraw capital from the companies as per request by the government.

The establishment of a securities company is recognized when it gets operation license, and the ending of a company is recognized when the license is revoked. When will the SSC declare the revoking of the license from the first securities company?

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