Stock Market Thirsty for New Cash Flow

The central bank has just released Directive 01/CT-NHNN, under which it continues grouping stock investment and trading into the list of non-productive sectors whose credit growth is capped at 16% of total outstanding loans like last year.

Vu Bang, chairman of the State Securities Commission (SSC), said the authority earlier had proposed the central bank moving securities out of the non-productive group to seek funds for the stock market.

Bang, meanwhile, supposed that the central bank does not reduce credit growth rate for non-productive industries including stocks is a positive decision at this time. However, this means local banks’ role in supporting the stock market remains limited in the coming time.

A number of securities enterprises cited the vague role of bank loans in a strong increase of some 20% of VN-Index over the past months. This situation is understandable, as these firms explained, because multiple lenders still avoid lending to securities investors while the latter still shy away from loans at steep rates of 22-25% annually.

In reality, several securities enterprises have offered collateral loans in an effort to woo investors, but this move has got no significant achievement. In the meantime, the capital flow on the market in recent months has mainly come from investors with deep pockets.

Therefore, it is believed that the central bank’s new regulation will cause no substantial positive impact on the stock market in terms of attracting new funds.

Nguyen Hong Nam, deputy director of Saigon Securities Inc. (SSI), said there were few large stock trading companies using their own capital or money funded by associate banks to lend investors.

Phan Dung Khanh, head of the analysis department of Kim Eng Securities Co., said funding on the market is mostly from gold and foreign currencies from speculators who were shifting to securities investment in the hope of earning bigger profits from securities.

Without any effective support from macroeconomic policy changes, Khanh pointed out, this money flow is obviously unstable.

Nam of SSI revealed there were no big foreign investors opening new accounts at his company and that the money flow from this sector showed no considerable change.