Securities Companies Grapple with Reduced Brokerage Revenue Amid Market Contraction in Vietnam

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As the overall market contracted and the total trading size shrank, securities companies faced a decline in brokerage revenue. Data from the Ho Chi Minh City Stock Exchange (HoSE) revealed that the top 10 securities companies with the highest brokerage value in the fourth quarter of 2022 were VPS Securities JSC (VPS), SSI Securities Inc (SSI), VNDirect Securities Co (VNDirect), Mirae Asset Securities (MAS), HCM City Securities Corporation (HSC), Vietcombank Securities Co (VCSC), MB Securities Co (MBS), Techcombank Securities Co (TCBS), KIS Vietnam Securities Corporation (KIS), and Việt Dragon Securities Co (VDSC).

Despite the market challenges, VPS Securities JSC (VPS) maintained its position as the leading stock brokerage company with a market share of 14.81% in the last quarter of 2022. This marked the eighth consecutive quarter that VPS held the top position on HoSE, although its market share was nearly 4 percentage points lower than the third quarter of 2022.

VPS securities also secured the leading position on the Hanoi Stock Exchange (HNX) in 2022, with a market share exceeding 21%. While other companies in the top 10 stockbrokers on HNX witnessed slight improvements or a decline in market share, VPS experienced an increase of nearly 5 percentage points from 2021.

Other securities companies, such as SSI Securities Inc (SSI) and VNDirect Securities Co (VND), also saw their market share on HNX improve in 2021, with increases of 0.14 and 0.12 percentage points, respectively. However, two companies, HCM City Securities Corporation (HSC) and Saigon-Hanoi Securities Co (SHS), dropped out of the top 10 on HNX and were replaced by KB Securities Vietnam JSC (KBS) and Vietcombank Securities Co (VCSC), with market shares of 3.12% and 2.76%, respectively.

Despite VPS’s rise to the top in terms of market share on HoSE, its brokerage revenue took a sharp hit in the fourth quarter of 2022. Throughout the entire year, VPS Securities Joint Stock Company, the leading company in terms of stock brokerage market share, only collected VNĐ550 billion in brokerage revenue, equivalent to half of the same period in 2021.

The overall brokerage revenue of the top 10 securities companies on HoSE, based on trading market share, declined by nearly 19.4% in 2022 compared to the previous year. VPS’s brokerage gross profit margin decreased from 22% in the fourth quarter of 2021 to 12% in the fourth quarter of 2022.

To maintain market share in the face of a shrinking market, many securities companies have had to compromise on efficiency. The ratio of gross profit to revenue in the brokerage segment has significantly decreased, with a 28.2% decline in gross profit for the top 10 market-leading enterprises in this sector.

In conclusion, securities companies have encountered a decline in brokerage revenue as the market contracts and the total trading size shrinks. Despite maintaining their market share positions, companies like VPS have experienced significant decreases in revenue. This challenges the efficiency and profitability of the brokerage segment

, requiring securities companies to adapt their strategies and find ways to navigate the challenging market conditions.

The decline in brokerage revenue can be attributed to various factors, including reduced investor confidence, lower trading volumes, and a general contraction in the market. With the total trading size of the market shrinking, securities companies have faced a smaller pool of opportunities to generate revenue from brokerage activities.

VPS Securities JSC, despite maintaining its position as the leading stock brokerage company, experienced a substantial decrease in market share and brokerage revenue in the fourth quarter of 2022. The company’s brokerage gross profit margin also declined significantly during this period. VPS’s challenges reflect the wider trend observed among the top 10 securities companies on HoSE, where brokerage revenue decreased by almost 19.4% compared to the previous year.

While VPS managed to retain its market share, other companies within the top 10, such as SSI Securities Inc and VNDirect Securities Co, saw modest improvements in their market share on the Hanoi Stock Exchange. However, these improvements were not enough to offset the overall decline in brokerage revenue for the sector.

In the midst of this challenging landscape, securities companies have been forced to trade off efficiency to maintain their market share. The ratio of gross profit to revenue in the brokerage segment has declined significantly, with a notable 28.2% decrease among the top 10 market-leading enterprises. This trend highlights the difficulties faced by securities firms in generating profits amidst market uncertainties.

Looking ahead, securities companies must focus on adapting their business models to the changing market conditions. This may involve exploring new revenue streams, diversifying their service offerings, or enhancing their technological capabilities to attract and retain clients. Additionally, building investor confidence and stimulating market activity will be crucial in reversing the decline in brokerage revenue.

The Securities companies are closely monitoring market trends and regulations to identify new opportunities for growth and profitability. It remains to be seen how the market will evolve in the coming months and how securities companies will respond to the challenges they face.

In Vietnam, overall brokerage revenue at most securities companies has declined due to the general market contraction and the shrinking total trading size. Despite maintaining market share positions, securities firms have faced significant challenges in generating revenue. The decline in brokerage revenue necessitates strategic adaptations and a focus on efficiency to navigate the current market conditions. Securities companies will need to explore new avenues for growth and profitability while building investor confidence to overcome these challenges and thrive in a changing market landscape.