Foreign investors continue to sell net

Last week, although the stock market quickly regained the strong psychological threshold of 1,200 points, the VN-Index still could not escape the downtrend due to the sharp plunge at the beginning of the week on August 5.

Liquidity on the HOSE floor last week increased slightly by 6% compared to the previous week, with a total transaction value of VND85,351 billion. Foreign investors had a net selling week of up to VND4,000 billion, focusing on selling bluechip stocks.

The sharp decline in market liquidity in July may have been the main factor preventing the market from surpassing the 1,300-point mark and moving sideways during the month. The driving force behind the VN-Index's increase in points in early 2024 is the cash flow from individual investors, which is currently decreasing. Meanwhile, macroeconomic factors such as economic growth, inflation still close to the Government's target, and controlled exchange rates are positive factors affecting the market.

In August, experts assessed that the risk of market decline would increase mainly due to the negative impact of the macroeconomic situation of major economies as well as escalating geopolitical tensions in the Middle East.

Statistics show that in the past month, up to 60% of stocks on the three exchanges have fallen by more than 15% from their peak. All 50 most traded stocks have decreased in price, of which half have decreased by more than 20%. These statistics show the difficulty in finding opportunities and avoiding losses for investors in recent times. August promises to continue to be a difficult month as capital withdrawal pressure continues from foreign investors in the context of market liquidity not improving.

Margin concerns arise

One issue that is being discussed a lot at the moment is that after reaching the peak of liquidity as well as the ability to attract cheap cash flow in the second quarter of 2024, the transaction value decreased rapidly in July under the net selling pressure of foreign investors, internal investors, and issuance pressure. Investors' cash balance decreased while the margin increased to a record level.

There have been many warnings when margins are high and market trends are unfavorable. A large margin may be a loan from business owners and shareholders to finance other activities, indicating difficulty in accessing credit.

This margin amount will create negative effects for the market if the cash flow of these businesses and individuals continues to be difficult, the large-scale liquidation will have a more negative impact on the general market than the liquidation of margin of small investors. ABS Securities Company has proposed 2 scenarios for VN-Index in August.

Scenario 1, in case the world situation is "peaceful", if VN-Index maintains the 1,166 mark, it will form a sideways accumulation structure.

Scenario 2, in the opposite case, the scenario of a downward price adjustment in August is prioritized. If the closing price of the week fails to maintain the 1,166 point mark, the general market will continue to adjust downward. The adjustment phases may occur quite quickly and strongly. At that time, the market's P/E for the last 12 months is expected to decrease to a quite attractive level of 12.6x - 11.9x. Therefore, in August, experts recommend that medium-term risk management be given top priority. Trading stocks during technical recovery phases should be carefully considered.