The fourth-quarter financial report of securities companies showed that customers’ deposit balance by the end of 2023 had reached VND80 trillion ($3.3 billion), up by VND20 trillion over the beginning of the year, most of which were securities investors’ deposits under the management of securities companies.

Meanwhile, outstanding loans by securities companies by the end of 2023 had reached VND180 trillion, or $7.2 billion, up VND15 trillion over the quarter before, including VND172 trillion worth of margin loans, up VND13 trillion.

Cash flow is very strong now with tens of billions of dollars ready to flow into stocks, which promises bustling trading sessions and stock price escalations.

However, market liquidity seemed to bear no relation with the strong cash flow. On January 15-19, the stock market witnessed the comeback of foreign investors after a year of strong sales, while listed companies began announcing good business results of the fourth quarter 2023. 

Meanwhile, investors heard good news from the National Assembly that two amended laws on land and credit institutions were approved.

The VN-Index last week increased by 26.8 points, officially outstripping the 1,180 point threshold. However, liquidity was low with the order matching volume 10.8 percent lower than the 20-session average level. The trading value on all three bourses dropped by 29 percent compared with the week before, to VND15.868 trillion per session.

The market liquidity began dropping early third quarter in 2023 with the average trading value on HOSE (HCM City Stock Exchange) in the first weeks of October 2023 falling to VND13-15 trillion per session.

Liquidity has not improved much, just hovering around VND15-17 trillion.

The number of individual trading accounts had dropped to 7.2 million by the end of 2023, which was the result of agencies verifying investors’ information. 

The low liquidity was seen amid the slow increase of the stock market despite recovery of the economy. Credit growth was also impressive, after the monetary policy was loosened. Many businesses reported good performance in 2023, including HoaPhat Group and banks.

Liquidity boom?

There are different explanations for the weak liquidity amid strong capital flow. Some analysts said liquidity is low because the big cash flow has not really entered the market. Bond debts and bank bad debts are high in 2024. A part of the cash flow from  loans from securities companies is being used to pay debts as was seen in late 2022. 

The fact that big shareholders mortgage shares to borrow money from securities companies shows that businesses still are finding it difficult to access bank loans and have to prioritize money for unfinished projects.

However, current conditions are different from those in the second half of 2022, when many companies had to sell shares to settle debts.

According to analysts, borrowing money via stock repo operations through margin mode was done. However, the amount of money that owners and businesses borrowed via securities companies was not high.

Vietnam Construction Securities (CIS) noted that lending by securities companies has increased sharply, but the number of investors’ transactions was small and capital turnover is low, thus leading to weak liquidity. Investors only borrow to buy shares once and then hoard the shares until share prices increase.

Regarding the amount of capital estimated at tens of billions of dong in investors’ accounts, CIS commented that investors are still waiting for new signs in the market to buy securities, rather than withdrawing money to inject into other investment channels.

Nguyen Duc Nhan from KB Securities said many investors cannot make profit even though the VN-Index is closer to 1,200 points. The Tet holiday is near and many investors fear risks during the long holiday.

Financial pressure on pre-Tet days many also force investors to sell part of their stock assets. The existence of large capital shows that investors are ready for transactions after Tet.

Manh Ha