Lots of money but low liquidity

According to the financial reports of the fourth quarter of 2023 of securities companies, the balance of customer deposits at the end of 2023 reached more than VND 80,000 billion (about 3.3 billion USD), an increase of about VND 20,000 billion compared to the beginning of the year. Of which, the majority are deposits of investors trading securities under the management method of securities companies.

Meanwhile, outstanding loans at securities companies by the end of 2023 are also very large, estimated at VND 180,000 billion (equivalent to about USD 7.2 billion), an increase of VND 15,000 billion compared to the previous quarter. Of which, outstanding margin loans are about VND 172,000 billion, an increase of VND 13,000 billion.

Thus, the cash flow into the stock market is very strong, up to tens of billions of USD poured in and ready to flow into stocks. This promises vibrant trading and the prospect of price increases.

However, in reality, liquidity developments are quite contrary to the above positive figures.

During the week of January 15-19, investors noted the return of foreign investors after a year of strong selling and listed companies began to announce their fourth quarter business results with initial positive figures. The extraordinary session of the National Assembly passed two important laws: the Land Law and the Law on Credit Institutions (amended).

The VN-Index increased by 26.8 points during the week, surpassing the 1,180-point threshold. However, liquidity was quite low. The matched volume during the week of January 15-19 was still 10.8% lower than the average of 20 sessions. The transaction value on the three exchanges decreased by nearly 29% compared to the previous week, down to VND15,868 billion/session.

In fact, liquidity in the stock market has "dropped pressure" since the beginning of the third quarter of 2023 with the average trading value on the HOSE floor in the first weeks of October 2023 falling to 13,000-15,000 billion VND/session, compared to the explosive liquidity period in July-September 2023 with many sessions reaching the billion USD threshold.

So far, liquidity has not improved much, only around 15,000-17,000 billion VND/session.

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A large amount of money is waiting for investment opportunities in Vietnamese stocks. (Photo: HH)

The number of individual securities accounts by the end of 2023 will decrease to more than 7.2 million, mainly due to the review and purification of securities participant data by competent authorities. In reality, hundreds of thousands of new accounts are still opened every month.

Low liquidity occurred in the context of a rather difficult and slow-growing stock market, although the Vietnamese economy recorded a year of recovery quite well compared to the world and has a positive outlook in 2024. Credit growth was also quite impressive in a year when monetary policy was loosened. Many businesses had good business results last year, such as the case of Hoa Phat Group (HPG) and a series of banks.

Liquidity is about to explode?

There are many explanations for the phenomenon of abundant money entering the stock market but low liquidity.

Some people believe that the key to low liquidity is that large cash flows have not really entered the market. Bond debt and bad bank debt in 2024 will be large. Part of the cash flow from securities companies' loans will be used to handle debts, similar to the end of 2022. The fact that major shareholders mortgage shares to borrow from securities companies may show that businesses still have difficulty accessing bank capital and have to invest money in unfinished projects.

However, the current situation is much different from the second half of 2022 - a period when many business owners had their shares sold to settle debts, such as in the cases of Phat Dat Real Estate, Hai Phat, DIC Corp, Novaland ... Currently, many businesses have significantly reduced their debt, and many organizations have cleared their bond debt, such as Kinh Bac Urban Development (KBC), Phat Dat (PDR)...

According to Mr. Luu Chi Khang, Director of the Research Center of CSI Construction Securities Company, in reality, there is a form of borrowing through stock repo transactions via margin. However, the proportion of money that owners and businesses borrow through securities companies is not much.

Mr. Khang said that the lending activities of securities companies have increased sharply, but investors have traded less, with low turnover, leading to low liquidity. Investors can only borrow and trade once, waiting for the stock price to increase before selling. The loan term for payment can be extended to 3 months through margin if there is no margin call.

Regarding the amount of tens of thousands of billions of VND - a record high in 2 years - waiting in the accounts of stock investors at the end of 2023, Mr. Khang said that it shows that investors are still waiting for the market to signal to buy back, and are not withdrawing money to deposit in other investment channels.

Some experts also believe that the decline in liquidity is due to the large stock warehouse being idle while the authorities increase inspections. The nature of buying and selling through stock warehouses is similar to the margin lending business of securities companies.

Besides, when the stock market is vibrant and stock prices go up, investors are less restricted than when the market is down or sideways.

Mr. Nguyen Duc Nhan, Director of KB Securities Trading Center, said that a large amount of deposits from individual investors at securities companies are not traded because of the fact that even though the VN-Index is close to 1,200 points, many people do not make a profit. Moreover, the fact that many individual investors are afraid of risks during the long holiday near Tet is real.

According to Mr. Nhan, reducing investments is also an activity to summarize the investment efficiency of a year. If there are new investments, many investors can wait for opportunities after the Tet holiday. Besides, there may also be financial pressure near the Lunar New Year, urging moves to sell and withdraw part of assets in the market.

Mr. Nhan said that the phenomenon of a large amount of money waiting in accounts at securities companies shows that investors are ready to join the game after the Tet holiday.

This expert predicts that after Tet, the stock market will increase strongly until the end of the first quarter of 2024 in the context that the negative stories have been absorbed in 2023. The VN-Index has many opportunities to surpass the peak of September 2023 (1,255 points) in February 2024, even conquering the 1,300 mark in the first quarter of 2024.

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