Stock market continues to fall

The selling pressure increased, causing the VN-Index to continuously decline. The continuous net selling of foreign investors affected the psychology of domestic investors. Therefore, the prospect of Vietnam’s stock market will depend on the development of the COVID-19 pandemic.

Vietnam’s stock market has the second-highest growth rate in the world (after UAE) with an increase of 28.7% in the first six months of 2021. As of June 30, 2021, the VN-Index reached 1,408.55 points, up 27.6% compared to the end of 2020. Along with the strong growth of the index, the stock market capitalization also increased strongly. The stock market capitalization increased by 29.2%, reaching 6,838 trillion VND, equivalent to 108.7% of GDP, exceeding the target set by the government.

The liquidity of the stock market continued to explode. From the beginning of the year until now, the average trading value has reached more than 22,770 billion VND a session, up 206.8% compared to the average in 2020. The strong increase in liquidity mainly came from domestic investors, while the foreign investors were net sellers. It showed that the influence of foreign investors no longer dominated Vietnam’s stock market in recent times.

In terms of capital mobilization, in the first six months of 2021, the total actual capital mobilization on the stock market is estimated at 176,745 billion VND, an increase of 65% over the same period last year, of which:

• Capital mobilization through share issuance and equitization was estimated at 26,857 billion VND, up 197%.
• Capital mobilization through the issuance of corporate bonds to the public was estimated at 8,394 billion VND, down 23%.
• Mobilization of capital for the state budget through bidding for government bonds increased by 63% with a value of 141,493 billion VND.

There were factors internationally and domestically that affected Vietnam’s market in the first half of 2021, specifically as follows:

• Vietnam has implemented well the “dual goal” of fighting the pandemic and boosting production and business at the same time. Thanks to that, many economic targets have still been completed as planned. GDP growth rate in the first half of 2021 still reached more than 5,64%, triple the increase of 1.82% in the first six months of 2020.
• Savings interest rates remain low, leading to people’s savings and companies’ idle money not being invested in production and business due to the COVID-19 pandemic temporarily shifting into the asset markets, especially the stock market and real estate market. The number of newly opened accounts increase sharply, causing liquidity and demand in the stock market to increase rapidly. In the first half of 2021, there were 620,683 new accounts opened, which was 3.7 times higher than the same period in 2020, equal to the number of newly opened accounts in the previous two years combined.
• Business results of listed and registered enterprises in the first quarter of 2021 are positive. According to the financial statements of the first quarter of 2021 of listed and registered enterprises (published until April 30, 2021), total profit after tax increased by 66.8% over the same period last year. In general, in the first six months of the year, the profit of listed companies is expected to remain quite good, especially in the banking and finance sector, steel industry, and securities.
• The valuation level of Vietnam’s stock market is still considered reasonable compared to the regional market. According to the National Financial Supervisory Commission, the P/E valuation of the VN-Index at the end of June was about 18.8 times, 30-50% lower than other ASEAN markets.
• Most of the world stock market has gained and recovered positively, investors are optimistic about the recovery of key economies such as the US, EU, and China. The COVID-19 vaccination program has been deployed on a large scale in many countries around the world, especially those with developed economies such as the US and European countries, bringing a brighter outlook to the world economy.

The market has declined since the beginning of the third quarter

From the beginning of the third quarter of 2021 until now, the market has experienced a quite strong correction with a decrease of 12.5% from the peak of 1,420 and is currently increasing by about 12.65% compared to the beginning of 2021, equivalent to a year. regional markets such as Korea, India, etc.

Closing the session on July 21, 2021, the VN-Index decreased by 2.5 points to 1,270.79 points, of which the VN30-Index decreased by 4.48 points to 1,406.54 points. Market liquidity has decreased compared to the trading session on July 20, 2021, with a matched value of more than 12,700 billion VND. Foreign investors' trade was not very positive when they net sold again with a matched value of nearly 1,392 billion VND in the whole market.

Foreign investors' net selling value was -1,391.52 billion VND on HOSE, including VIC (-1,191.5 billion VND), MSB (-136.5 VND) and CTG (-73.8 billion VND). Foreign investors were net buyers on HNX with a value of 9.66 billion VND.

Foreign investors were strong net sellers on the HSX, focusing mainly on VIC shares. Weak market liquidity with market breadth in a neutral state still shows that VN-Index will continue to move in the range of 1,250-1,300 points.

The VN-Index continued to decline, making investors pessimistic about the prospect of the stock market in the short term, at least until the end of July 2021. Information about the increase of COVID-19 cases in many provinces and cities has made a great impact on the investors’ psychology.

In the coming time, the economic outlook of Vietnam in general and the stock market in particular still depends a lot on the situation of Covid-19. With the complicated developments of the Covid-19 epidemic, many businesses' business activities were affected. The information that drives the market to grow, such as the third-quarter business results, will hardly be positive.

Vietnam’s stock market in the coming time will face risks as follows:

• The stock market has grown for a long time from August 2020, surpassing the 1,400 point mark. The prices of many securities codes are at quite a high level after a period of strong increase. Therefore, at this stage, the stock market is relatively sensitive to information and investors’ profit-taking psychology. The market may have corrections with a fairly large frequency.
• The complicated and unpredictable developments of the COVID-19 pandemic in countries around the world and Vietnam. In case the pandemic continues to break out and last for a long time, it will affect the production and business process of enterprises and affect the psychology of investors in the market.
• The recent increase in the proportion of individual investors in Vietnam’s stock market from 79% in 2019 to 82% may increase the investment psychology of the majority, causing great fluctuations in the market.
• The price index of raw materials, fuel, and materials used for production in recent months has increased compared to the months before, as well as the same period last year, which may make the manufacturing enterprises face many challenges in the coming time, and it will be difficult to keep the profit growth as in the past time.
• In the world, many central banks have begun to give signals about the possibility of applying policies to deal with inflation, such as stopping economic stimulus policies or announcing plans to raise interest rates. If these policies are implemented soon in the world, and if domestic inflation pressure increases, it will put more pressure on the stock market to correct down.

Source: Ministry of Industry and Trade