The proportion of individual investors is too high, the unfinished upgrade story, and the lack of quality “goods” are the main reasons why the VN-Index has been “going sideways” for nearly two decades.
After hitting bottom since the 2008-2009 financial crisis, the main US stock indexes all increased by the same amount, even compared to before the crisis. Down Jones increased from 7,700 points to its current peak of more than 42,400 points, a level more than three times higher than before the financial crisis. The S&P 500 jumped to 5,700 points compared to more than 1,000 points in early 2009.
In Asian stock markets, if the increase is not in double digits, it is also measured in times. Japan’s Nikkei 225 bottomed at 7,400 points in February 2019, currently reaching more than 39,600 points. This number is also more than double that before the crisis (17,400 points). South Korea’s Kospi increased from 1,100 to more than 2,600 points. The SET Index of the Thai market exited the 2008 financial crisis with a level of more than 440 points, currently reaching more than 1,400 points.
Vietnam, a market often considered by foreign investors to be the most attractive in the region, has gone sideways for nearly two decades. Compared to the bottom level after the economic crisis, Vietnamese stocks also recorded a recovery. But compared to the previous peak, VN-Index is almost “stagnant”. HoSE’s index returned to pre-crisis levels in 2021, after more than a decade, rising above 1,500 points and then correcting. Currently, the VN-Index is still hovering around the 1,200 – 1,300 point area, not too different from the level before the economic crisis.
Why have Vietnam’s stocks stagnated for nearly two decades? “The first reason is that the Vietnamese stock market depends too much on individual investors,” Mr. Nguyen The Minh, Analysis Director of Yuanta Securities Company told VnExpress.
According to this expert, the high proportion of individual investors can be considered a characteristic of the Vietnamese market, accounting for nearly 90% of daily transactions. A characteristic of this group is investing according to the crowd, being psychologically influenced, leading to participation and withdrawal at a rapid pace.
In 2021, when the VN-Index reached a record of more than 1,500 points, the F0 investor group (first-time investors participating in the market) accounted for a high proportion. The number of newly opened securities accounts continuously reached a peak, from vegetable sellers to office workers all talked about the stock story. But a year later, VN-Index dropped deeply with many “blank buying” sessions when the market suffered a massive sell-off. Only a small number of F0s that joined a year ago remained.
“Relying too much on small individual investors leads to high levels of market volatility. When the market is FOMO, liquidity is very high, but when the crowd gets bored and leaves the market, liquidity almost disappears.” . The market lacks sustainable momentum to maintain,” commented Yuanta, chief analyst.
The second reason is the story of foreign investors. According to Mr. Nguyen Duy Anh – Head of Portfolio Management Department of Vietcombank Fund Management Company (VCBF), net selling pressure from foreign investors is also an important factor that makes VN-Index unable to escape the sideways price range. around 1,200-1,300 points. Since the beginning of the year until now, foreign investors have net sold more than 3 billion USD.
“This not only directly affects stock prices but also affects the general psychology of the market, when cash flow from foreign investors – which is considered a factor supporting liquidity and sustainable growth – has not come back strongly,” Mr. Duy Anh commented.
The fact that foreign investors “play quickly and concisely” in the Vietnamese market, according to Mr. The Minh, is due to market factors that are not attractive enough.
Positioning in the marginal group makes Vietnam only ranked in the speculative market group, according to Yuanta Securities Analysis Director. Foreign investors will not be able to set long-term expectations and invest stably in a market ranked in this group. Meanwhile, the market structure and types of goods are not diverse enough to retain large investment funds. Especially the lack of diversity in blue-chip stocks and financial products.
Like the Thai market, the size of their shares is only 1/3 of Vietnam’s, but the capitalization is about 6 times greater. That is, the number of large capitalization stocks in Thailand is many times greater than that in Vietnam.
“The current blue chip group in the Vietnamese stock market is dominated by banking stocks, lacking the presence of other industries. That is really a problem,” Mr. Minh commented. As at the beginning of this year, when the technology stock fever spread globally, the driving force for major markets largely relied on this group, but in the Vietnamese market, the VN30 group had only FPT as its stock. technology coupon. “The lack of blue-chip businesses in the non-financial group is the reason why Vietnam stood out from the wave of the financial market earlier this year.”
Mr. Huynh Hoang Phuong, market analyst, also expressed a similar opinion. The current market is mainly dominated by two groups: banking and real estate – accounting for about half of the market capitalization.
“Whether or not the market can be overvalued (that is, will it grow) depends largely on reducing risks in these two stock groups. If the upcoming third quarter business results will be announced, it will show a positive picture. Extremely positive, VN-Index has a lot of potential to grow,” Mr. Phuong stated.
In addition, according to experts, lack of financial products is also the reason along with the “commodity” story of the market. Derivative products up to now on the stock market only include VN30 futures contracts and warrant products. Risk prevention tools such as “short selling” have not yet been applied.
Minh Son – Tat Dat
