On the afternoon of December 6th, the stock price of FLC Faros Construction JSC (HOSE: ROS) fell sharply for the third consecutive day, closing at VND150,400 (roughly US$6.63). The stock has fallen by 30% in its recent losing streak.
Earlier, in the second quarter of this year, the stock had a drop to 50% of the market price after a long increase since the listing on HOSE in September last year.
Apart from the erratic price fluctuations, ROS stocks have created a liquidity phenomenon on the stock market for more than a year.
Data show that, from the listing to December 5th, the trading value of ROS stocks accounted for an average of 9.6% of the total trading value on HOSE. In particular, in some April’s sessions, ROS stocks accounted for over 30% of the liquidity of HOSE.
The high price and a large number of listed stocks have made ROS a factor that greatly affects the performance of VNIndex since the beginning of 2017.
Faros shareholders are estimated to have paid up to VND332 billion (about US$14.6 million) for brokerage fee. This figure is based on the assumption that the lowest rate prevalent in securities companies is 0.15%. In fact, many individual investors may have paid even higher fees at different securities companies.
It is estimated that in the first nine months of 2017, the total brokerage fee that Faros shareholders had to pay was even higher than the company's after-tax profit (VND208 billion – about US$9.2 million).
The cost of generating liquidity for ROS stocks may be several times higher if the shareholders use the margin trading service (borrowing from brokers to buy shares).
However, ROS’s Chairman Trinh Van Quyet, who owns 67% of the shares, contributed only a small amount to this fee. Since ROS’s listing, Quyet bought 110 million more shares, but ROS price was low at that time, so the fee is not high.
Another company, FLC Land, also holds 5.32% of Faros shares and has not traded since the listing. As a result, most of the fee has been paid by the shareholders, who own 28% of the shares.
The brokerage fee paid by Faros contributes to the growth of the brokerage revenues of securities companies in the first nine months of this year. According to the statistics from the top 20 securities firms, brokerage fees rose by 52% year-on-year in the first nine months of 2017.
Notably, Artex Securities of Trinh Van Quyet owns more than 8%. In September 2017, this company reported a revenue of VND83 billion (about US$3.7 million), increasing by 11 times compared to the same period last year. This is the largest brokerage turnover this company has made in years.
In the first quarter of 2017, the company even topped the ten brokerage stocks with the largest share on the HOSE with 3.52%. Then in the second quarter, its market share increased to 5.9%, surpassing SHS, VCBS, and BSC.
In recent months, the liquidity of ROS stocks has decreased by about one million shares per session on average. Therefore, ROS’s liquidity ratio on HOSE also decreased significantly, on average 6.6% from the third quarter up to now.