Measuring financial lever

VNStockNews.com - During three decreasing sessions of the middle of last week, small investors with information shortage on stock market had to suffer strong impacts from the rumours on funding supply of securities companies for securities investment.

It was rumoured that each among the three largest securities companies in the market arranged tens of trillions of dongs for investors to buy shares, which created high pressure on lifting mortgages. The message that those rumours wanted to send to investors was that securities companies were propelled to distrain clients. The market would only sell shares. In order to measure the lift of mortgages, it is required to measure how large the amount of money that securities companies used as a financial lever for investors is.

Most of securities companies admitted that they cooperated with banks to arrange loans for investors to buy shares. However, in such a relation, securities companies play an intermediate role and only banks could know the exact figure.

State Securities Committee also said that SSC received different sources of news but there was no statistics. That was because lending capital to investors to buy shares at securities companies was not allowed. Thus, no securities company reported such figure.

Measuring the financial lever in the stock market is a big question for investors and the market. A general director of a medium securities company shared that with the brokerage market share of 2 - 3 percent of the whole market, total financial lever that his company arranged for investors was 400 billion dong. Then, it was estimated that the financial volume that securities arranged for investors is about 16 trillion dong – 20 trillion dong.

The figure of 16 trillion dong or 20 trillion dong is only an estimate. The real figure may fluctuate around those figures because the loans arranged for investors of the stock market were mainly from banks. (According to the central bank, by the end of October, total outstanding loans of credit organisations to securities purchase was 12 trillion dong), and the remaining (some 4- 6 trillion dong) came from ownership equity of securities companies.

Each person has their own feeling about this figure. However, what the market needs is basically transparency but not simply a figure. The stock market would not be able to avoid bad effects of rumours. Small investors cannot avoid losses if such activities that directly impact supply and demand in the market including financing investors were not transparent.

Last week, SSC announced the draft circular on instructing depository securities trading.