Rising stock account numbers despite plunging trade causes worry

"I opened the other three accounts because registration is easy and more brokerages mean I get to receive more regular investment advice," the 30-year-old office worker explained.

In the last two years brokerages have hugely simplified the account opening process, he said.

When he opened his first account in 2020, he had to visit the brokerage, but this year he opened a new account online.

People like Dung are partially the reason why the number of new stock accounts has been skyrocketing despite a decline in trading.

Over 476,000 new accounts were registered in May, the highest ever monthly figure in the stock market’s two-decade history, according to the Vietnam Securities Depository.

Around 1.4 million new accounts were opened in the first five months of this year, higher than the total number added between 2017 and 2020.

There are now 5.65 million stock accounts, or one each for 5.7 percent of the population.

But the average daily trading in May fell by 32 percent year-on-year to VND17.77 trillion ($764.14 million), the lowest in 15 months.

Analysts said the number of stock account is rising because brokerages are making it easier than ever to open a new account as they compete for market share.

Le Ngoc Nam, director of analysis and consultancy at Tan Viet Securities, said since many brokerages are now partnering with banks, a new bank customer usually gets a new stock account too.

It takes just minutes to open an account, and investors can sign digitally on smartphone apps to have their contracts approved.

"Many accounts are not even activated, and there is no money in them to trade," Nam said.

Nguyen The Minh, director of analysis at Yuanta Securities Vietnam, said "ghost accounts" make up around 80 percent at his company.

Park Won Sang, CEO of brokerage KIS Vietnam, said while within five months this year the number of new stock accounts exceeded last year’s figure, only 10-12 percent of them see transactions.

The main bourse, the Ho Chi Minh Stock Exchange, saw trading plunge to the lowest levels in a year and a half to around VND10 trillion.

The benchmark VN-Index has been struggling to recover from a steep fall in May. An 18.7 percent fall in the benchmark this year has investors running for cover.

Minh said: "The new account figures do not reflect actual investment. This creates a distorted picture of the market."

It also makes it more difficult for authorities to manage the market, he added.

Park said there is a shortage of stock brokers with an estimated 5,000 taking care of 5.6 million accounts, meaning one broker for every 1,000-odd clients.