The psychological concerns about the disease, foreign investors’ net selling, and margin handling are the key reasons that are making the stock exchange face the decreasing session of approximately 6%.
With the loss of 43.14 points on 23rd March of the VN-Index (equivalent to 6.08%), closing the session at 666.59 points, the domestic stocks have gone through the second severely decreasing session in the last 19 years (after the session on 9th March).
From the beginning of the year, the highest index on the HOSE exchange has dropped by approximately 300 points, equivalent to more than 31%.
In the last month, this index has also fallen by more than 28%. According to Le Vuong Hung, Director of the Brokerage Business Division of Rong Viet Securities Company (VDSC), The psychological concerns about the disease, foreign investors’ net selling, and margin handling are the key reasons that are forcing investors to sell off their stocks.
According to Hung, the trading session on 23rd March also fits the decreasing trend of the VN-Index that has been going on for a month.
The main reasons for this are the fact that Covid-19 is affecting not only Vietnam but also other nations in the world, together with the information regarding the increasing dangerousness and complexity of the disease, as well as how hard it is to make any prediction.
“Major economies in the world, including China, Korea, Japan, the EU, and the US, which are key trading partners of Vietnam, are all affected. This negatively affects the domestic economic growth”, Hung said.
According to him, most governments would choose the people’s health over economic development, thus resulting in the widespread quarantine affecting the economies, especially trading production.
“According to forecasts, this epidemic will lead to an economic depression, initially in the first and second quarters of the year. Global experts have also forecasted that there might be an economic crisis this year”, Hung said.
In the stock exchange, foreign investors' movements have also had a strong impact on the psychology of domestic investors when the group of foreign investors has been net selling continuously for the last 30 sessions.
Since the beginning of the year, this group of investors has net sold approximately VND 10,000 billion. "This is a very large number compared to recent years," he stressed.
In addition, Mr. Hung said that the oil price war between OPEC countries and Russia was also a factor to make the stock market go down further in the context of being affected by the disease.
Hung said, in fact, Vietnamese investors are not strangers to shockingly decreasing sessions, as the exchange witnessed several of those during the period from 2008 to 2012.
However, the event of more than 200 decreasing code on the HOSE on 23rd March is rare in Vietnam. In February 2008, when VN-Index was also more than 800 points, the exchange dropped by 190 points per month.
However, currently, when March has not been over yet, the decreasing level has already passed that of February 2008. It is clear that the market development is in an awful state”, Hung emphasized. He said that in the near future, the market would definitely be in a downtrend to find a short-term bottom.
This week (March 23-29), there might be an increase but the trend till the end of the week would still be down. "This time the decline was due to the disease, so when the epidemic peaked, it could also be the time when the stock market bottomed out and started to go up," Mr. Hung shared. Mr. Hung predicted that in this week, VN-Index would drop to around 600 points.
This is also the area that investors expect the market to create a medium- and long-term bottom. According to him, strong sessions like that on 23rd March are very easy to help the market create a bottom in 1 to 2 years.
In addition, if calculating from a peak of 1,200 points in April 2018, the reduction has also nearly reached the threshold of 50%. “With the selling volume today, the market will continue to plummet tomorrow, possibly close to the threshold of 600 points.
The drop of 50% from the peak is too big a discount for the Vietnamese market. Each stock has a reasonable price, and the market cannot be reduced forever,” he emphasized.
According to Hung, the most important thing for the market today is to overcome the disease, because with the advantages of Vietnam, as soon as the epidemic is over, the Government will have a lot of support packages for businesses and the recovery momentum will come very quickly.
>> The stock market liquidity improves, stocks prices increase