Employees at VNDirect Securities Corporation. By borrowing from investors while they do not use capital to conduct transactions, securities company can quickly ultilise idle money of investors to significantly improve profit margins (Photo courtesy of VNDirect)Securities companies, via a new form of cooperation with their customers, willmobilise capital from customers if they do not use the capital to conducttransactions.
To supplement capital for business, securities companies often borrow fromcredit institutions. However, this takes time and is not always feasible.
By borrowing from investors while they do not use capital to conducttransactions, securities company can quickly ultilise idle money of investorsto significantly improve profit margins. Meanwhile, investors can enjoy profitsfrom the interest rates offered by the securities companies.
When investors need to conduct securities transactions, they can quicklyperform transactions without transferring external money from the bank.
Some companies such as the Tri Viet Asset Management Company (TVC), MBSecurities (MBS) and VNDirect Securities Corporation (VND) have offeredrelatively attractive interest rates to customers.
Interest rates for a six-month term are usually 7-8.5 percent per year. Forsome prioritised customers, the rates can even reach up to 10 percent per year,much higher than the interest rates offered by banks at the moment.
Not only high interest rates, securities companies also offer many terms forinvestors to easily join, even 1-week terms with a relatively attractiveinterest rate of 2-3 percent per year.
Banks usually offer interest rates of below 0.3 percent per year for this termlength.
For many budding investors, the idle time for money in their account is quiteshort, most of which last only one to two weeks. If they lend the money to asecurities company, they can enjoy high interest rates of 2.5 percent per yearfor a short term from one to two weeks.
However, this form of cooperation also poses a risk for both sides if thesecurities company cannot afford to pay interest to investors. So far, themarket has not recorded any controversies.
Recently, there has been an explosion of new investors entering the stockmarket, also known as "F0" investors. Data from the depository center(VSD) shows that in 2020, there were nearly 394,000 securities accounts openedby domestic investors, doubling the previous year.
In the first month of 2020, the market received more than 86,000 newly openedsecurities accounts and this was also the month with the largest number of newaccounts in history.
The entry of a new class of investors has led to a sharp increase in the demandfor margin services in the market. By the end of 2020, outstanding loans atsecurities companies totaled about 90 trillion VND, an increase of about 30trillion VND compared to the end of Q3 of 2019, most of which are margin loans.This is an all-time record number.
Outstanding loans of margin lending have increased dramatically, causing manysecurities companies to fall into a shortage of lending sources./.
VNA
