In the first three quarters of this year, Vietnam's stock market increased sharply with the participation of many domestic investors, especially new investors (also known as F0 investors).
Individual investors account for 90 percent of transactions
After making a record high at 1,420 points at the beginning of July this year, the VN-Index plunged to 1,243.51 points on July 19. Currently, the VN-Index stands at 1,350 points, up about 8 percent over the past two months. In July and August this year, the number of new securities accounts opened by F0 investors exceeded 100,000 accounts per month, sending the total number of new securities accounts opened in the first eight months of 2021 equal to 130 percent of that of the whole of last year. It shows that the stock market has become an attractive investment channel during social distancing.
Along with a sharp increase in the number of new securities accounts, statistics from securities companies show that the proportion of transaction value of domestic individual investors has reached the highest level in recent years, accounting for 90 percent of total transactions in the market. Market liquidity remained at a high level, with the average total trading value in the past few months reaching nearly VND22.5 trillion per trading session by August 31. The cash flow of individual investors has been playing an important role in leading the market. Although foreign investors have net sold VND51.4 trillion in the first nine months of the year, the VN-Index has still climbed by more than 22 percent compared to the end of 2020.
According to FiinPro, integration services and financial data provider, the lowest interest rate level in the past five years in Vietnam has significantly supported the cash flow into the stock channel. It is reflected via the number of newly-opened securities accounts and increasing market liquidity, especially the deposit balances of investors at securities companies. It was estimated that by the end of August this year, the deposit balances of VND90 trillion of investors were waiting for opportunities to enter the market.
A representative of Dragon Capital Fund Management Company said that the stock market in August and three weeks of September continued to recover from the bottom hit in July this year. It showed that the market was relatively stable while the Covid-19 pandemic still developed complicatedly, and socio-economic activities were influenced heavily by strengthened social distancing. Investors are looking forward to a more positive fourth quarter when social distancing gradually loosens.
Expectations on banking stocks
The stock market has been developing positively, but the cash flow in the stock market in recent months has mainly focused on midcap and penny stocks. Many penny stocks have surged strongly, even surpassing the peak despite the negative business results. Meanwhile, banking stocks, known as king stocks, fell by 20-30 percent, affected by negative information from bad debts.
With such developments, a securities expert said that economic reopening would lead to the possibility that speculative cash flows, the money of F0 investors, which temporarily poured into the stock market during social distancing, would be withdrawn to return to normal activities, such as production and business. Besides, investors may withdraw money from the stock market over concerns that the Covid-19 pandemic will recur.
Experts said that the increasing momentum of the stock market in the coming time depends a lot on banking stocks. The State Bank of Vietnam has allowed commercial banks to continue restructuring debts and accompanying businesses to overcome difficulties. Therefore, it is expected that banking stocks will receive huge cash flows back at the beginning of the fourth quarter when social distancing loosens and many businesses resume operations under the new normal conditions.
According to Mr. Huynh Anh Tuan, CEO of Dong-A Securities Company, it requires a large sum of money to activate the rising momentum of banking stocks. When the economy opens more clearly, king stocks will attract the cash flow again.
Mr. Do Trung Thanh, Head of the Business Analysis Department of PSI Securities Company, also said that cash flow would be divided into stocks that benefit from the loosening of social distancing.
Specifically, stocks related to public investment, such as infrastructure construction and construction materials, will lure the cash flow because these are activities with quick impacts on economic recovery. Moreover, stocks of the energy, retail, and logistics sectors will also reap benefits when domestic demand rebounds strongly after social distancing.
According to the State Securities Commission (SSC), the sharp increase of investors has partly proved the attractiveness of the stock market over the past time. However, amid the unpredictable developments of the Covid-19 pandemic, the stock market will experience many fluctuations. Therefore, investors need to broaden their knowledge about securities and corporate finance when participating in the market to invest safely and effectively.
Currently, the SSC has been strictly supervising and inspecting to clarify abnormal signs in some groups of stocks that show signs of being cornered and manipulating prices on the market. If violations are detected, it will slap strict penalties.