Challenging Time for Vietnam Stock Market: Investors Afraid of Losing Money

 

There is still discussion during the last few days about an investigation into SME Securities regarding individuals who have been involved in the fraud case. The Chairman and CEO as well as Vice Chairman have all been arrested.

 

Accordingly, many people are concerned about losing their hard-earned money, as in the case of SME, because of the relatively low transparency of the market.

Mr Hung, an investor with an account at SME, said that he was lucky to finish transferring his money out when problems had just arisen at SME and thus is not stuck.

According to him, a number of investors were not fast enough to withdraw the outstanding balance of their accounts in the SME case. Another investor revealed that a couple of months ago, knowing that the securities company was losing its liquidity, using his connections to create pressure, he eventually succeeded in withdrawing around VND100 million.

 

But the number of investors as lucky as the two above in the SME case is few and far between. An anonymous investor complained, "Since late 2011, this company has had a history of losing its liquidity. The deposit department frankly said that there was not enough money and that customers would have to wait in the next two or three weeks to withdraw their money. At the moment we just have to wait."

 

Ms Nguyen Thi Hong living in Thanh Hoa province expressed her frustration about the sudden closure of a Thanh Hoa branch of An Binh Securities Company, where she opened an account.

 

Accordingly, on July 31, she received a notice by phone regarding the closing of the Thanh Hoa branch of An Binh Securities effective from August 2012 and investors would have to place their orders using other means such as telephone, internet or text message.

 

However, when being transferred to the company's telephone exchange to place her orders, she learned that the staff on call had not updated her account information yet. This effectively ruined her selling order on that day and caused damages.

 

Ms Hong's story is not unique. Ms Hien in Ho Chi Minh City, an investor at Sacombank-SBS Stock Exchange, lamented that she has to go to the company's headquarters to place her orders because there are currently no SBS branch and trading office in Ho Chi Minh City.

 

In fact, several other securities companies have recently issued notices regarding the closure of their trading offices and branches in Ha Noi, Ho Chi Minh City and other provinces.

 

Since late July 2012, Vietnam Trade and Industry Securities Company has announced their decision to shut down their branch in Hue and withdraw their trading profession; Truong Son Securities Company withdrew their brokerage profession and closed down their branch in Ho Chi Minh City; MB Securities shut down their trading office at Khuat Duy Tien (Hanoi); Golden Bridge Securities shut down their Hanoi branch; the securities company under Vietinbank shut down their office at Thai Thinh (Hanoi)

 

At the moment, SME is one of the four, together with Hanoi, Truong Son and Dong Duong Securities Company, to have their brokerage licenses withdrawn

Further investigation reveals that with the exception of SME, the websites of the other three companies are inaccessible. Many investors who wish to withdraw their money have to seek the approval of securities companies, and even with approval, they cannot withdraw a large sum all at once.

 

From the SME case, economic expert Dinh The Hien analysed: "It would be much safer if securities companies allow banks to manage their accounts, compared to if they manage these accounts by themselves. Tens of millions of VND that each investor puts in is a small sum, but if multiplying by hundreds of investors, it is a huge number."

 

According to Mr Hien, the key lesson is that smart investors need to know how to protect themselves, but not to blame their circumstances.

 

Mr Le Vuong Hung, Deputy Director of Brokerage Division at Rong Viet, also said: There are two choices: investors either choose a securities company with a reputable brand and safe transactions; or a security company with high financial leverage, low transaction fee but potentially high risks.

 

Also according to Mr Hien, the common trend is that securities companies whose operations are not efficient will gradually disappear. Investors will have to pay a hefty price should they choose a securities company which is too easy in opening an account or providing their services.