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Failure to conform with margin trading laws leads to added risks

Update: August, 23/2014 - 09:56
An investor opens an account at VNDirect securities in Ha Noi. — VNS Photo Thai Ha
HA NOI  (VNS) — Margin trading generated more profits for investors as well as securities firms and higher market liquidity, but it also posed many risks if not complied, heard a conference in HCM City yesterday.

In the first half of this year, margin loans of top 10 brokerages reached over VND6 trillion (US$283 million), rising 30 per cent compared to the end of last year.

Some brokerages violated regulations of the lending ceiling to lure investors. But it created risks and an unfair competition among companies.

A representative from Saigon Securities Inc revealed that some securities firms offered margin lending rates up to 80 per cent of the portfolio value compared to the ceiling of 50 per cent.

If companies did not comply with legal administration, it would lead to losses and inadequate operational capital. In fact, it became practical cases with many companies.

Investors also needed to follow the regulations. "Using leverage in times of market turbulence may cause great losses," said associate professor Tran Hoang Ngan, vice principal of the HCM City University of Economics.

In addition, Ngan noted that idle money could come to the stock market if the market became more transparent and fairplay.

The amount of individual deposits in the banking system was about VND2,200 trillion ($103.7 billion). "If 30 per cent of the current savings is poured into stocks, liquidity will increase significantly," Ngan said. — VNS

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