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Covid-19 "swept away" 44 billion dollars of market capitalization

Wednesday 25, 03 2020
The stock market entered the trading session on 24th March relatively calmly.
Covid-19 swept away 44 billion dollars of market capitalization

This is a rare session that has achieved this status since the beginning of the year. Looking back at the market through the two peaks of the epidemic, 44 billion USD of market capitalization has been lost and many sequelae were left behind.

Increasing epidemic leads to the plummet of capitalization

Investors' sentiment seemed to be calmer, as the selling pressure was not too strong on the board in the morning session on 24th March.

They traded "gently" around the price zone of 660 and did not have many mutations after the matching sessions.

With this development, no one would have thought 10 billion dollars had been swept away on 23rd March. If you consider the period from the Lunar New Year to now with 2 peaks of the Covid-19 epidemic, the selling pressure has weighed heavily on each session.

On the HOSE in the past 2 months, market capitalization has lost more than 1 million billion VND (equivalent to 44 billion dollars). The latest evidence for the fierce market is that on 23rd March the VN-Index fell by 43.14 points (6.08%) to 666.59 points.

This is the third session that this index has dropped over 5% since the Lunar New Year, dragging the VN-Index to its lowest level in 3 years.

This session also saw more than 200 stocks hit the floor on HOSE, accounting for 35% of the listed stocks on the market. Particularly for the VN30 group, 27 out of 30 codes dropped to the floor, of which 25 codes did not have any buyer.

On both HoSE and HNX, the 5 biggest codes that have lost the most so far are SAB, VJC, SCS, VNM, and BHN. Among them, 2 codes represent the beer and wine industry (SAB and BHN), 2 codes represent the aviation and transportation industry (VJC, SCS) and the remaining one belongs to the dairy industry (VNM).

In just 2 months, the market evaporated tens of billions of dollars in market capitalization, and the stock market price dropped to a low price range, causing many businesses to plan to spend trillions of VND to buy treasury stocks.

This move is considered an emergency "prescription" to save stock prices and increase "antibodies" for businesses to prevent the risk of being acquired.

In the context that the Vietnamese and the global stock markets are gloomy, there is still no certainty for the next developments.

That may be the reason why foreign investors are gradually withdrawing from the Vietnamese stock market to return to the traditional markets. The best evidence is that the chain of 30 net sales of this group in the context of disease control is still unclear.

Foreign capital "temporarily avoids" the Vietnamese market

Not only losing capitalization, but the stock market is also experiencing many losses in terms of investment.

Concerns about the effects of the Covid-19 pandemic, the negative impact in the oil price war between OPEC and Russia dragging the price of oil down deeply, and the selling-off pressure to collect dollars have made the world stock market fall sharply in the past time.

In the Vietnamese market, the P / E ratio is at the 11-12 level, but it is not too attractive for foreign investors as they have net sold 30 consecutive sessions on the HOSE with a value of up to 8,500 billion VND.

ETFs are contributing to the strong increase in net selling in the last month of foreign investors. Other foreign investors have also sold quite strongly from overseas funds that have been closed or withdrawn during this period.

Covid-19

The wave of capital withdrawal from emerging markets, like Vietnam, has been there since the beginning of the year when US stocks continuously peaked and large investment funds also chose this market as their main investment.

However, this shift encountered an unexpected event, which is the Covid-19 epidemic. The US dollar is strengthening, causing other investment channels to be hesitant, and withdrawing from securities to hold dollars is the most reasonable in the context of the current disease outbreak.

Different from the past periods, when Vietnam's economy proved to be relatively stable against external fluctuations; At the current stage, the Covid-19 epidemic is forecasted to have a strong impact on economic growth, as well as the profits of domestic businesses, and more seriously, it could lead to a global economic crisis.

Looking back at the period of 2003, when the global economy had just recovered from the crisis in the US in the late 2000s and the Asian crisis in the late 1990s, the impact of SARS on economic growth was relatively clear.

At the present time, although there has been no basis for detailed evaluation, the recent report of KBSV Securities Company said that the Covid-19 epidemic would have a much bigger impact as the global economy had previously shown signs of weakness.

Central banks do not have much room to loosen their policies, while the economic cycle has passed a period of growth that lasted more than 10 years since the last crisis.

"Up to now, the Covid-19 epidemic is making most economic forecasts inaccurate, so the temporary exit from the stock exchanges in developing markets will be optimal in the short term.

Comparing the level of market knowledge, it is clear that foreign investors are still more knowledgeable about the US and European markets than the Vietnamese market, thus making the reverse of the capital flow reasonable” the KBSV report stated.

KBSV believes that the impact of the Covid-19 epidemic on Vietnam's stock market volatility will certainly be much greater, because not only does it have a greater effect on the domestic economic growth and the profit growth of listed enterprises, but it also affects the equitization plans, divestment of state-owned enterprises, and the increase in the capital of state-owned banks.

​>> Why are stocks continually sold off?

Source: https://www.thesaigontimes.vn

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Stock Market

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