Billion USD capital flow from Taiwan has not stopped flowing into Vietnamese securities

4 min read

Over the past year, Vietnam’s stock market has welcomed a large capital inflow of billions of dollars from Taiwan. New money entered the market through two channels of funding for securities companies and buying from new open-ended investment funds.

Billions of dollars in capital flows from Taiwan to Vietnam

Previously, Taiwanese investors have come to Vietnam, but the pouring of capital from this developed market into Vietnam is actually clearer than in recent times. In the context of foreign investors’ net withdrawal of about 2.3 billion USD in 2020 and the first half of 2021, new capital inflows will help support the market’s growth momentum.

According to the writer’s statistics, the amount of capital mobilized from new open investment funds from Taiwan and disbursed to Vietnam has reached about 1 billion USD.

In September 2020, a new fund from Taiwan called CTBC Vietnam Equity Fund began disbursing into Vietnam’s stock market. The size of this fund increased rapidly after that, reaching NT$12.6 billion (equivalent to VND 10,337 billion) by the end of June.

In mid-April this year, another new fund, the Fubon FTSE Vietnam ETF, also bought shares on the Vietnamese market. Right in the IPO, this foreign fund raised NT$10 billion (VND 8,261 billion).

Since the end of June, Fubon FTSE Vietnam ETF continues to raise new money and disburse into Vietnam. Updated on July 26, the fund’s scale reached nearly NT$15 billion (nearly VND 13 trillion), becoming the strongest disbursed ETF in Vietnam’s stock market.

Thanks to disbursement from the Fubon FTSE Vietnam ETF, foreign capital flows into Vietnam reversed in July after many consecutive months of net selling.

Hundreds of millions of dollars quench the thirst for margin

Mobilizing capital from Taiwan by domestic securities companies in the past year. Source: Loi Hoang synthesized.

As mentioned above, capital from Taiwan not only poured into Vietnam’s stock market through new funds but also indirectly through capital financing contracts for securities companies. Recently, the market received information that SSI Securities (Code: SSI) raised another 100 million USD from Taiwanese financial institutions.

In the announcement issued by the company, the head of loan arrangements and clues are Union Bank of Taiwan (UBOT) and Taipei Fubon Commercial Bank Co., Ltd (Fubon). There are also the participation of big banks such as Bank of Taiwan, Taiwan Shin Kong Commercial Bank, Hua Nan Commercial Bank.

One of the uses of this $100 million is margin lending. At the end of last year, this securities company also raised $85 million in capital from a group of nine banks from Taiwan, led by Union Bank of Taiwan (UBOT). In 2019, SSI raised $55 million in international capital.

With the capital raised at the end of last year, SSI Securities promoted margin lending and became the company with the largest lending scale in the market, reaching VND 15,539 billion as of June 30.

In the first half of this year, domestic securities companies actively mobilized capital from international financial institutions. In March and April, VietinBank Securities (code: CTS) raised $90 million from Taiwanese and Korean banks. The purpose of use is to expand the array of business activities.

In May, HSC Securities (code: HCM) signed an unsecured loan contract of 44 million USD (about 1,015 billion VND) from a group of 7 Taiwanese financial institutions, led by First Commercial Bank (FCB). The purpose of using capital is to supplement financial capacity, expand financial investment services, and scale operations.

Or Technological and Commercial Securities (TCBS) also borrowed another 459 billion VND (about 20 million USD) from Taishin International Bank Co. Ltd. In the second quarter, along with SSI, TCBS was one of the leading margin lending companies.

Thus, a total of securities company funding contracts and disbursements through funds and capital flows from Taiwan have disbursed more than $1.3 billion into Vietnam’s stock market in just a few months.

This capital has helped quench the thirst for margin in the market. Particularly for securities companies that are in the process of raising capital, this short-term cash flow has helped reduce margin tension.

Source: Loi Hoang synthesized.

Back to the story of increasing capital of securities companies, in order to meet the capital needs of investors, a series of companies adopted the plan to increase charter capital, mainly through the issuance plan to shareholders.

In the announcement issued by the company, the head of loan arrangements and clues are Union Bank of Taiwan (UBOT) and Taipei Fubon Commercial Bank Co., Ltd (Fubon). There are also the participation of big banks such as Bank of Taiwan, Taiwan Shin Kong Commercial Bank, Hua Nan Commercial Bank.

In fact, the issue of capital has great significance for securities companies not only in margin lending activities. Because with abundant capital will help the company develop many other activities such as underwriting, investment banking, proprietary trading. With limited capital, many securities companies cannot promote margin activities even though “room” (margin/equity) is still large.

Source: Loi Hoang synthesized.

Source: vietnambiz.vn – Translated by fintel.vn