Vndirect Securities Joint Stock Company (Vndirect, HoSE: VND) has just had a report on Vietnam’s securities industry with the topic “When the wind turns”. Accordingly, Vndirect believes that Vietnam’s securities industry is one of the most attractive investment sectors with low penetration and rising income.
Looking around the region, Vndirect found that the financial services sector (DVTC) in Vietnam has great potential. As of the end of the second quarter of 2023, the investor-to-population ratio in Vietnam was only approximately 7%, lower than the rate of 7.5% in Thailand (inactive investors were excluded). and also lower than 12.5% in Malaysia.
In addition, the strong growth in disposable income of households in Vietnam in recent years has shown an increased demand for financial products as well as revenue from brokerage firms. The Vietnamese government is also taking steps to support the development of the securities sector (a new trading system developed by KRX). With all these factors combined, Vndirect experts believe that the prospect of Vietnam’s financial services sector still has great untapped potential.
Average daily transaction value from 3 main exchanges will reach 20-25 trillion dong in the second half of 2023
Since mid-March 2023, the operating interest rate of the State Bank (SBV) has decreased 4 times: the rediscount rate decreased by 1.5 percentage points to 3.5%/year, the refinancing interest rate decreased by 1.5 percentage points per year. 1.5 percentage points to 4.5%/year, the maximum interest rate for deposits with a term of less than 6 months decreased by 1.25 percentage points to 4.75%/year.
Vndirect expert said that the SBV can maintain the current policy interest rate until the end of 2023 thanks to the fact that real interest rates in Vietnam are still higher than in the US and the exchange rate is expected to be controlled in the second half of 2023. .
Thereby, Vndirect expects the average daily transaction value (average transaction value) from the 3 main exchanges to reach 20-25 trillion dong in the second half of 2023 (up from 16 trillion dong in the second quarter of 2023 – level with the first 6 months of 2021) thanks to low deposit rates as well as more attractive investment opportunities.
Combined with the ratio of margin lending for the whole industry to the total value of listed assets in the last 3 years at about 17% – 20%, Vndirect forecasts that the total margin lending in the whole market can reach 155 – VND 180 trillion in the second half of 2023, implying a 10-30% increase from VND 140 trillion at the end of the second quarter of 2023.
Vndirect believes that securities stocks will have positive developments in the second half of 2023
Up to now, the industry valuation is trading at a P/B of 1.6x, much lower than the industry average in the last 3 years. Not only that, Vndirect expects the stock market to accelerate in the second half of 2023 thanks to the expansionary monetary policy and supportive fiscal policy.
In this context, the stock sector would be the best representative of the market revival. Vndirect experts pointed out that brokerage companies with the advantage of small investors and a high degree of digitization will benefit the most from the strong capital inflow into the stock market, including: SSI, VND, MBS.
In addition, with margin lending more active, financial services companies have the potential to grow in margin lending and the ability to maintain spreads (the difference between the margin lending rate and the cost of capital). ) will be able to expand margin income such as: SHS, AGR, SSI, BSI and MBS. Vndirect also expects the earnings of the whole stock market to improve thanks to better investment performance of stocks in the portfolio of securities companies.
Most companies are trading below the 3-year average P/B (data as of August 18, 2023). Photo: Company report, VND.
After a volatile early 2022 with the stock market, most investors are afraid of stocks of securities companies. As a result, the valuation of this industry has been under considerable pressure since the beginning of 2023. Currently, the valuation of this industry is at a P/B of 1.6x, lower than the average for the last 3 years. This.
With the stock market expected to pick up pace in the second half of 2023 on the back of expansionary monetary and fiscal policy support, the brokerage industry will be the best representative of a stock market recovery. Therefore, Vndirect believes that securities companies will have better performance in the second half of 2023.
Vietnam is one of the attractive investment destinations in the financial sector
Besides, Vndirect also shared the investment thesis because Vietnam is one of the most attractive investment destinations for the financial services sector, benefiting from the stock market with low penetration, high speed. high disposable income growth and the government’s commitment to sector development.
Second, in the context that low deposit interest rates will support capital inflows into the stock market, brokerage firms with the advantage of retail investors and a high degree of digitization will benefit, including : SSI, VND, MBS.
Next, as margin lending activities also improve, brokerage firms with high potential for margin lending growth and high spreads include: SHS, AGR, SSI, BSI and MBS.
Finally, overall stock market earnings are likely to improve as interest rates remain low. Thus improving the investment efficiency in the portfolio of securities companies.
