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Momentum loss: don't be too pessimistic, don't rush!

Momentum loss: don't be too pessimistic, don't rush!

Monday 24, 02 2020
The expectation of a usual increase in stock prices at the beginning of the new year has disappeared under the pressure of the Covid-19 epidemic.

The calculation of investors is also more or less different in the context that the capital flow into the stock market is declining, although the prospect of the future is still quite bright.

The market “loses momentum”

Since the beginning of the Lunar year, the stock market has sometimes fallen into crisis as the VN-Index dropped to 890 points. In earlier trading sessions, the stocks of several sectors have met the negative reaction of investors under the unprecedented pressure of Covid-19.

Leading stocks in several sectors have declined significantly in the 12 sessions after Tet, including, specifically, the aviation stocks, which is considered directly-affected by the epidemic. Stocks of enterprises with products being sold in the Chinese market also have to suffer from reduction. For example, the VNM stock of Vinamilk (which is aiming to export more to this market) has declined by 12.1% to 106,000 VND/share, or the VHC stock of Vinh Hoan Seafood Company has declined by 11.62% to 35,000 VND/share. The retail sector has also recorded similar declines, such as the MWG stock (The gioi Di Dong) declining by 10.15% to 107,100 VND/share, the SAB stock (Sabeco) declining by 16.84% to 189,800 VND/share.

Stocks of companies in the manufacturing sector with individual “attraction” like the BMP stock (Binh Minh Plastic) or the HPG (Hoa Phat Steel) have also dropped by 9.91% and 9.89%, respectively. Meanwhile, the two main fields of the stock market, which are real estate and banking, have also shared the same fate. For example, the market price of VIC (Vingroup) has dropped by 4.26%, and that of VHM (Vinhomes), VCB (Vietcombank), and TCB (Techcombank) have dropped by 2%, 4.39%, and 3.72%, respectively. However, the banking sector also has notable diversification with the increase of 15% of VPBank’s stock, or the increase of 7.76% of ACB’s stock, resulting in optimistic signs for the market after sessions which are full of crisis.

Momentum loss: don't be too pessimistic, don't rush!

Generally, according to the statistics of the Ho Chi Minh City’s Joint-stock Securities Company, in the period from 22nd January to 14th February, the fields with the most serious decreases were fields suffered heavily from the Covid-19 virus, such as the tourism and entertainment sectors decreasing by 12.42%, the insurance sector decreasing by 11.6%, the food and beverage sectors decreasing by 9.71%, and the retail sector decreasing by 8.79%.

On the other hand, there were fields with increased capitalization, such as the telecommunication sector, the car and parts sector, or the medical sector with increases of 7.1%, 5.1%, and 4.1%, respectively. As people are worrying about their health at the moment, the medical sector has recorded several stocks with increased prices regardless of the different scales or competitive advantages. For example, the DHG stock of Hau Giang Pharmaceutical has increased by 8.52%, or the IMP stock of Imexpharm has increased by 15.6%.

Notably, the DNM stock (Danameco) has increased to 75.29%. In addition to the sharp increase in revenue and profit in the last year’s report (the statistics are unaudited), the pharmaceutical stocks with a small capitalization scale are deemed to be benefiting from the mask production in the current period of production shortage and increasing prices.

The opposite movement of the pharmaceutical stocks is considered a rare optimistic sign in the market. However, many experts believe that the reason for this is the short-term mentality, and currently, domestic pharmaceutical firms are having no competitive advantage related to the current epidemic situation. “Stocks that live of the disease are receiving benefits created by the “short wave”, but in the long-term, this is not going to last”, stock expert Phan Dung Khanh stated.

Waiting for a balanced state

After sessions that are full of crises in the early of the year, currently, the market is regaining balance. At the end of the 2nd trading week of February, the VN-Index stayed at 937.45 points on 14th February, declining by 5.5% compared to the first trading session after the Lunar New Year, and by nearly 2.5% compared to the beginning of 2020.

Bui Van Huy, Head of HSC market strategy analysis, said that the market was temporarily stable due to the bottom-fishing demand when the market plunged, the new monetary flow entering the market via ETF funds, the positivity of the global stock market, and the expectation of investors for a loosened policy to support the economy. However, challenges related to the unstable market remained for investors to solve.

“The mentality has not been completely good, and the relatively low liquidity in recoveries, as well as the developments of the Covid-19 virus, has shown no sign of improvement”, Huy said. The comments of the Ministry of Planning and Investment have also shown the wide influences of the epidemic on nearly all economic sectors, in which the investment activities will also fall in both the short- and long-term, especially for foreign and private investments.

With the scale and influence of the Chinese market, the global capital flow will likely revert. According to SSI, the value of capital withdrawn from stock investment funds in the South Asia region in the first week of February reached its peak in 19 weeks. Correspondingly, the foreign capital attraction prospect in the stock market in February and the following months of Vietnam has dropped to the low level. Obviously, the following market development still depends on the epidemic control situation and the timely supporting policies of the authorities.

However, at the moment, the majority of suggestions of securities companies remain short-term risk management in the context of the temporarily stable market, with the estimation of it being continuously adjusted.

According to HSC’s representatives, if the epidemic shows signs of improvement and the auditing market successfully escapes the bottom level, investors may accumulate sectors with positive prospects and are not directly affected, such as banking, information technology, telecommunication, or those with the “defensive” characteristic, such as electricity and water. “Investors should not be too pessimistic as well as rushed”, Huy said, sharing the vision for a bright long-term market prospect despite the clear negative effects of the Covid-19 virus.

>> Aviation stocks as soon as the Corona epidemic is successfully controlled

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