Market rally boosts borrowing against shares

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With the stock market gaining around 12 percent over the past two weeks, investors have started borrowing against shares again to invest in the market, securities companies say.

A broker at Vietcombank Securities Co. said the number of customers borrowing against the shares they already own, is on the rise.

"Many investors have used up their stocks collateral for such loans," he said, adding the loan are capped at 40 percent of the value of the mortgaged securities.

He also said his company grants these loans an interest rates of 15 percent.

Pham Duy Hung, head of the brokerage department at Apec Securities, said the amount of loans against securities granted by his firm rose by 20 percent compared with the middle of last month.

 Nguyen Mien Tuan, general director of Vietnam Dragon Securities Company, said the number of investors mortgaging stocks for loans has increased as market liquidity has improved.

Meanwhile, the chief analyst of a securities company said as investors' confidence in the market rebounds this month, they are rushing to borrow by pledging shares, betting that their speculation would be rewarded with even higher share prices.

The fact that listed firms are paying dividends is another motivating factor, he said.

However, Hung of Apec Securities advised investors to exercise caution as the market may experience some fluctuations after the rising streak of the past several days.

"Investors should remain cautious when borrowing against shares to prevent "˜a double loss' of paying interest rates on the loans and suffering falling stock prices in case the market crashes," he said.

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