Last weekend, the Vietnam’s stock market continuously declined in point. On July 8, 2021, VN-Index decreased to 1,385.29 points, HNX-Index decreased by 0.51% to 318.19 points, UPCoM-Index down 0.46% to 88.73 points. The whole market recorded a trading volume of 426 million shares, equivalent to a value of 13,776.41 billion VND, down 18% compared to the previous session. The value of matching transactions on HOSE alone was 10,677.72 billion VND.
Foreign investors turned to be net sellers on HOSE with a total value of 117 billion VND, in which NVL was the most sold stock with a value of 395 billion VND. The reasons for the market drop are:
- In terms of indexes, recently, VN-Index has approached the strong resistance level of 1,415-1,420. Therefore, the appearance of a correction session is expected.
- Lately, the cash flow has mainly focused on securities and banking stocks, so profit-taking pressure appeared on a large scale in these stocks. For businesses that investors expect to have positive business growth in the second quarter of 2021, the stock price has recently been reflected, so profit-taking pressure also appears.
- The COVID-19 is developing complicatedly, which results in worries about difficulties in business activities, and affects the speed of economic growth.
- During the period of stock market growth, many investors have made certain profits. To increase profits, many investors also use financial leverage, margin loans. Therefore, when the market corrects, putting pressure on margin calls, triggering sell transactions takes place quickly and strongly.
- In recent days, the market has had correction sessions. However, with the old system, when the liquidity fell to 22,000 billion VND, matching transactions were slowed down, the downward momentum had to stop, and it was impossible to sell. Up to now, the new system has been put into operation, buying and selling are also easier and faster.
In a short period, the market's uptrend will return. However, when there is a strong downward correction, there is inevitably a big risk. Therefore, controlling the portfolio weight is very necessary for this stage.
Investors holding a high proportion of stocks and using margin will need to sell off the margin or even reduce the portfolio proportion to equilibrium. That helps to ensure the safety of the portfolio if the market has a strong downtrend in the short term, actively cash to re-enter when the stocks have the prospect of returning to the reasonable price range.
For investors holding a tremendous amount of cash, it is worth considering opening long positions with low weight, when the market returns to the zone of support of 1,283 – 1,320 points.
The VN-Index is trading at a P/E (price-to-earnings ratio) of 19.3 times. In terms of both relative comparison and historical statistics, the current market valuation is no longer cheap, but also not expensive either. It is expected that the market would be corrected soon when the P/E level hits 20x (or maybe 21x). The correction can push VN-Index to the threshold of 1,200 points. That is a good buying opportunity for investors with a growth vision in the next three years.
Vietnam’s stock market in the first six months of 2021 saw new records made in terms of newly opened accounts, liquidity, and VN-Index.
The growth of the Vietnamese stock market witnessed many new records, with multi-session liquidity reaching more than 1 billion USD and the market capitalization reaching more than 105% of GDP.
Currently, there are about 3.3 million individual investor accounts in the country, 500,000 of which are new accounts opened in the first six months, and this number continues to increase. It is predicted that by the end of the year, there will be about 300,000 new accounts, aiming to have about 5% of the total population of the country, equivalent to five million securities accounts.
Regarding foreign investors, the current portfolio value of foreign investors is 49.5 billion USD. That is a good and appropriate growth of the stock market in the context that in the first months of the year, Vietnam still managed to control the COVID-19 pandemic.
GDP growth is low compared to the set target. However, it is still an impressive number compared to other countries in the region. The market grew well thanks to abundant capital flow with relatively low and stable interest rates. Outstanding loans to securities lending only accounted for 0.48% of the total outstanding loans of the economy.
The cash flow from the bank is well controlled, the margin capital flow managed by the State Securities Commission is also under control. Besides, the impact from the loosening monetary policy of countries, leading to low-interest rates, continues. In particular, the middle class and young people with relative incomes are investing a significant amount of money in the market.
Therefore, the attractiveness of the stock market remains when other investment channels such as real estate have not regained their appeal. But shortly, some hot stocks may adjust.
To develop the stock market, the regulator will continue to promote the restructuring of the stock market based on four pillars, including restructuring of commodities, investors, securities trading organizations, and the exchange.
A key solution implemented by the State Securities Commission in the last six months of this year is to focus on inspection and supervision of market activities to ensure the strictness and discipline of the market.
Compiled by VietnamCredit