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This was an unexpected result soon after the stock market reacted to the shocking news. However, from an investor perspective, this period is transitory as a drop in the VN Index is completely normal and not a true reflection of trading.
VN Index distorted
Although the VN Index is a composite index that includes all stocks being traded on HoSE, the nature of this index is heavily influenced by a group of the largest capital stocks. The reason lies in the format of calculating the index when it depends on the capital of component stocks. Therefore, the strength of stock prices, in general, is only one factor, sometimes very minor, because the price movement in the largest group of stocks determines how many points the VN Index has.
In the above eight trading sessions, the VN Index decreased by 9.83 points, and up to 9.57 points were lost because four stocks were VCB, BID, SAB, and VIC. Simply put, these four stocks almost invalidated the index, even though the rest were all up. So, when looking at the above fluctuation, we need to question if these four stocks are representative of the whole market.
In fact, the stock market has gainers and losers every day, but statistics also show that most of the stocks have reacted well to this news in the last few days. Specifically on HoSE, since the news of the interest rate reduction, 243 of 406 stocks increased in price, equivalent to about 60 percent. If we only count stocks that had transactions during this time, about 380 stocks reached 64 percent. Of course, it is not possible to expect all the stocks on the exchange to increase in price because of limited cash flow, but such a ratio of more than half also gives a good trading probability.
With more detailed statistics, it is clear that the profit opportunity for investors is not too bad. There are 50 stocks on this floor that have grown by 8 percent or more, increasing by 1 percent per session. Twenty-four of these stocks have average daily liquidity of VND 10 bln or more which is enough for investors to participate safely. Some notable gainers were TCD which was up by 40.33 percent, BCG by 23 percent, SCD by 20.94 percent, VDS by 20.78 percent, DIG by 19.44 percent, HHP by 18.82 percent, LSS by 18.69 percent, NVL by 17.12 percent, ORS by 16.19 percent, and DLG by 15.74 percent.
If the index is distorted then it is clear that the speculative strategy of large-cap stocks is not an effective strategy, even easily leading to losses. Investors have preferred to choose small to medium-cap stocks, which have limited liquidity but are a natural advantage to increase in prices because of low selling volume.
Individual investors
In terms of profits, it is clear that money earned in any stock is good, no matter how big or small. However, in terms of overall market trends, it is problematic for blue chip stocks to offer low investment returns.
First, the blue chips are a source of strength of the representative index. If these codes do not grow well, the index will not increase. Many investors and analysts still consider the VN Index as a market signal, so when the index is poor, there will be no consensus on common ground. When the general market trend is not clear, the common strategy will be to speculate on short-term shocks, surf a few T+ rounds, and get ready to jump ship.
Second, blue-chip stocks are the main trading of large to very large investors, investment funds, and institutions. Therefore, these codes are weak and cannot increase but instead decrease, which means that there is selling pressure from big investors. This is not a good sign, because large institutions or investors always evaluate medium and long-term opportunities on the basis of fundamental factors. Without strong buying participation from this group of investors, it is difficult for the market to explode into a trend.
In fact, liquidity has also increased in recent sessions with the average matching level of the two exchanges at about VND13,600 bln per day. It is not wrong to evaluate this as a sign of cash flow returning to stocks but with the weak price in most blue chips, it seems that there is a phenomenon of selling by large investors to individual investors rather than vice versa. An interesting statistic in the last eight trading sessions is that individual investors net bought 7 of 8 sessions, with a net value of about VND2,284 bln. Meanwhile, domestic organizations were net sellers in 6 of 8 sessions and the self-trading sector was a net seller and matched orders on HoSE for 3 of 8 sessions, but was still a net seller. Foreign investors in HoSE stock trading only sold 7 of 8 sessions. This indicates that although groups of investors still trade on a daily basis, in general, individual investors are playing an aggressive role. This is also consistent with the increasing price movement, mainly in small and medium-sized stocks by individual investors.
