SSI Securities Corporation (SSI) last week approved the issuance of 453.3 million shares to increase its charter capital to nearly $818.54 million. This issuance comprises up to 302.2 million shares from equity and up to 151.1 million shares offered to existing shareholders.

Similarly, Viet Dragon Securities approved a plan to boost its capital by nearly 54.3 per cent, reaching about $135 million. VDSC will distribute an 11.5 per cent dividend in shares, issue 8.85 million ESOP shares, and conduct a private placement of up to 81 million shares to strategic and professional investors to enhance financial capacity and support business expansion.

More issuances approved to bolster securities capital, illustration photo/ Source: freepik.com

Vietcap Securities endorsed three capital-raising methods, increasing its charter capital to nearly $300 million, while FPT Securities also plans to raise its charter capital from $89.38 million to approximately $127.45 million.

MB Securities will issue rights to 109.4 million shares to shareholders and conduct a private placement of over 28.7 million shares (at a negotiated price, not lower than book value) to professional investors to support business activities.

Meanwhile, Viet First Securities and Thien Viet Securities both approved the issuance of more ESOP shares to bolster their capital.

ACB Securities also received approval from the State Securities Commission (SSC) and the Ministry of Finance to increase its charter capital by $125 million to about $291.67 million.

Capital mobilisation is critical for enhancing profit margins in margin lending, a significant growth driver for securities firms, and is essential for boosting proprietary trading, the second-most important business segment for these companies.

By the end of Q1, total market margin debt returned to its 2021 peak, reaching $8.33 billion, marking a nearly 20 per cent increase from the end of 2023, with considerable growth potential remaining.

At the AGM in April, Nguyen Mien Tuan, chairman of Viet Dragon Securities, detailed the company’s strategy to expand its capital base to enhance financial capacity, supplement margin lending, advance payments, proprietary trading, underwriting, capital business, and technology investments.

“Most securities firms’ capital-raising initiatives are viewed as preparation for significant developments following the launch of the Korean Exchange (KRX) trading system and the expected upgrade of the Vietnamese stock market from frontier to emerging status by 2025,” Tuan said. “The KRX system, anticipated to allow intra-trading transactions and selling pending securities, requires securities firms to enhance resources for technology investment, new products, and improving user experience.”

An upgrade to emerging market status is projected to attract significant foreign capital inflows, estimated by the World Bank to be $25 billion by 2030, thereby increasing competition among securities firms.

Nguyen Khac Hai, head of Legal and Compliance at SSI, said, “Both short-term and long-term capital pressures are increasing on securities firms to upgrade systems and enhance service capabilities for investors. Most securities firms plan to raise capital in 2024 and 2025 to prepare for this significant development.”

Nguyen The Minh, analysis director at Yuanta Securities Vietnam, observed that recent capital increases have largely come from firms without bank backing due to the lack of financial support.

“Additionally, the SSC prohibits securities firms from raising funds from customers, necessitating the search for market capital to support business operations,” Minh said. “Furthermore, many securities firms are transitioning towards investment banking models, moving beyond securities trading for transaction fees, which requires immediate resource preparation.”

Minh believed that upcoming market changes, such as intraday trading, selling pending securities, and relaxing margin requirements for foreign investors, will make securities firms pivotal in risk mitigation, necessitating compliance with minimum charter capital requirements.

“Pre-funding operations, in particular, require substantial capital,” Minh noted. “Some securities firms are increasing capital following investments in corporate bonds or commitments to repurchase bonds. This increase could indicate risks in bond recovery, prompting investors to scrutinise these firms’ proprietary trading portfolios closely.”