Domestic stocks experienced sharp declines in the last week of July and the beginning of August 2024, followed by a rebound, helping many investors regain some composure. However, the widespread decline in global stock markets at the end of last week, driven by concerns about a US economic recession and increasing geopolitical instability, has left domestic investors feeling uneasy.
The trend cannot be confirmed yet.
Referring to the developments in the domestic stock market last weekend, Mr. Do Bao Ngoc, Deputy General Director of Kien Thiet Vietnam Securities Company (CSI), said that August 2nd was the last day for the 9 ETE funds referencing the VN-Diamond and VNFIN Lead indices to finalize their July 2024 restructuring. These funds bought a large number of bank and securities stocks – which significantly influence the overall market.
"This is one of the reasons why the VN-Index recovered strongly at the end of the session, while stocks in other sectors did not rise as much. Therefore, in the coming sessions, we must closely monitor market developments, especially observing the supply and demand from investors' capital flows," Mr. Do Bao Ngoc observed.
According to Mr. Phan Dung Khanh, Director of Investment Consulting at Maybank Securities Company, given the developments in the stock market last weekend, it is still too early to confirm the upcoming trend. This is because the crucial factor for the market at this time is that liquidity (cash flow) remains very weak; foreign investors continue to sell net relentlessly.
"Pressure from rising deposit interest rates, soaring gold prices, and record-high loan balances of securities companies… are also factors impacting the VN-Index. Currently, the 1,180 - 1,200 point range is the medium-term support zone for the market," Mr. Phan Dung Khanh commented.
Will the news of sharp declines in many stock markets around the world during the last two trading sessions of the week put pressure on the VN-Index at the beginning of next week? Dr. Ho Quoc Tuan from the University of Bristol (UK) believes that the correction in major stock markets, including the US market, even a 5%-10% drop, is reasonable because they have risen too sharply and there is not much room for further gains. Other investment channels such as gold, USD, oil, etc., are attracting more capital.
According to Dr. Ho Quoc Tuan, generally speaking, the decline in many international financial markets compared to the previous month is not too negative, except for the Japanese market. "If the US economy weakens, the flow of capital into emerging markets, including Vietnam, will also be affected. This is because Vietnam has a highly open economy. Geopolitical instability in the world will negatively impact Vietnam because the rate of trade growth will decline," Dr. Ho Quoc Tuan assessed.
The green color of the Vietnamese stock market on August 2nd helped investors regain their composure after the earlier plunge. (Photo: Le Tinh)
Still stuck around the 1,200 point mark.
Many investors are wondering why, despite positive domestic factors (positive national economic data for the first seven months of the year, and promising Q2 and first-half 2024 business results for many listed companies), the stock market is still falling? Furthermore, the final hurdle for Vietnam's stock market to be upgraded to emerging market status is gradually being removed as the regulatory body is about to eliminate the pre-funding requirement for foreign investors.
According to experts, the aforementioned information was already reflected in the previous stock price increase. In fact, in July, many small-cap stocks (penny and mid-cap stocks on the Upcom exchange), despite lacking strong fundamentals, increased by 50%-100%, even 200% in a short period, so the recent plunge is understandable. This created pressure from cross-selling and forced liquidation from sources outside of securities companies, causing the VN-Index to fall sharply.
Regarding the VN-Index's many ups and downs and its stagnation around the 1,200-point mark for the past decade, Mr. Do Bao Ngoc analyzed: In recent years, the Vietnamese economy has been negatively impacted by many issues such as the COVID-19 pandemic, economic downturn, frozen real estate market, and difficulties faced by domestic businesses… These factors have prevented the Vietnamese business system from recovering strongly, thus keeping the domestic stock market sluggish.
Mr. Do Bao Ngoc commented: "The nature of the stock market in recent times has been heavily speculative, with very little investment element. Therefore, in the last 2-3 years, the Government and state management agencies have been very decisive in cleaning up and purifying the stock market."
According to Mr. Ngoc, many stocks of companies listed on the HNX and UpCoM exchanges are currently nothing more than "junk stocks" because they lack fundamental basis, the businesses operate unethically, and some even raise capital from investors for speculative purposes. Over time, this erodes confidence, leading many people to avoid long-term investment in the stock market and instead focus on speculation and short-term investments.
"Therefore, it is necessary to improve the quality of goods and products of listed companies, especially to clean up the stock market so that efficient businesses attract capital and build investor confidence," Mr. Ngoc said.
The return on investment remains good.
Mr. Nguyen The Minh, Director of Analysis at Yuanta Securities Vietnam, believes that technically, the VN-Index is in oversold territory. After deep corrections, the market's P/E (price-to-earnings ratio) has fallen to 13.5 times, the lowest level seen in April. The projected P/E for 2024 has also decreased to 11.5 times, indicating very high stock yields, at 9%-10%.
"From now until the end of the year, it will be difficult to find an investment channel with a high return like stocks. Besides being attractively valued, the high probability that the US Federal Reserve (FED) will lower interest rates in September and the cooling exchange rate will give foreign investors no reason to sell heavily on the Vietnamese stock market, and they will soon return to net buying. If the VN-Index reaches the 1,200-point mark, it will also provide a good opportunity for investors to invest and anticipate the upcoming upward trend," Mr. Minh analyzed.
Source: https://nld.com.vn/ky-vong-thi-truong-chung-khoan-het-i-ach-196240804191636422.htm
