SECURITIES LENDING / Finance Ministry may exit TSFC
Written by Writer on Monday, November 10th, 2008
SECURITIES LENDING / Finance Ministry may exit TSFC
NUNTAWUN POLKUAMDEE and WICHIT CHANTANUSORNSIRI
The Finance Ministry may withdraw its investment in TSFC Securities if its role as a margin loan lender for the securities sector is no longer needed.
But local brokers say they support the TSFC’s operations and position as a margin loan provider.
TSFC, the only licensed company in the country to provide securities financing, margin loan refinancing and securities repurchase agreements, is facing significant losses due to the sharp decline in share prices on the Stock Exchange of Thailand in recent weeks.
The decline has affected not only TSFC’s investment portfolio in stocks and unit trusts, but has also cut into the value of collateral pledged against its margin loans, forcing it to set aside provisions against losses.
Tris Rating on Friday cut its rating for TSFC from A to BBB- and placed the company on a negative watch due to deteriorating fundamentals. Unrealised losses on securities investment totalled 525 million baht as of June, and Tris expects the company to slide into a loss for the year due to higher provisioning requirements and further losses on its securities portfolio.
The Securities and Exchange Commission said TSFC shareholders are currently in talks about a possible recapitalisation. The TSFC is 10.73% owned by the ministry, 37.5% by commercial banks and 16.42% by 19 brokers. Other shareholders include the SET, two finance companies and a number of finance companies closed since the 1997 crisis.
Areepong Bhoocha-oom, the director-general of the State Enterprise Policy Office, said the ministry was awaiting a restructuring plan from the TSFC before deciding whether to participate in a recapitalisation.
He said that from a policy perspective, it was worth questioning whether the TSFC was even necessary anymore, as many brokers now offered margin loan services on their own to investors.
“In the long term, it might not be necessary for the Finance Ministry to even hold a stake. But for now, we will have to see what the company proposes, and whether further investment will be worth it or not,” Mr Areepong said.
He said a number of options were available, including a rights issue to existing shareholders, a placement with a new partner or the issue of preferred shares to raise capital.
But Kampanart Lohachareonvanich, the chairman of the Association of Securities Companies, said he believed the TSFC continued to play a beneficial role in providing funding to the market.
“If you ask other brokers, the answer I am sure would be that to [have the TSFC] is better than not,” he said. “What has happened to the company is a result of the global crisis.”
Mr Kampanart noted that the TSFC had only two sources of revenue: interest earnings from margin loans and returns from its investments.
He said this contrasted with other brokers, who primarily depended on commissions for revenues. Even brokers with proprietary trading arms have suffered relatively little from the crisis overall.
Bangkok Post
Monday November 10, 2008
