Covid-19 epidemic could be the catalyst starting a new recession

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Mr. Phan Linh (pictured), CEO of Take Profit Consulting and Investment Co., Ltd. spokewith Customs Newspaper about this issue.

Recently, the increasing selling pressure caused the Vietnamese stock market to experience deep falling sessions and the strong "evaporation" capitalization. How do you view this phenomenon?

Most investors believe that the recent decline of the market was due to the impact of the Covid-19 epidemic. But in my opinion, the Covid-19 epidemic is just a catalyst to make the world economic recession come faster. Through the year, the world economy has experienced loose monetary policy by central banks since the 2008 crisis. Accordingly, central banks have the lowest interest rates, even the European Central Bank (ECB) also performed negative interest rates. The US Federal Reserve (Fed) also lowered the interest rate to near zero, while pumping a huge amount of money, approximately US$3,500 billionthrough three QE packages ( quantitative easing program).

Beginning in 2015, the Fed has taken steps to withdraw money from circulation by raising interest rates when it realized that the economy began to grow and the unemployment rate dropped to a record low. Therefore, sooner or later the economy will have adjustments to complete a cycle after growth. Great crises like 2008 will usually have a period of about 70 - 80 years like the Great Depression of 1929 - 1930, alternating with recessions with a cycle of about 10 years.

Of course, recessions will take place faster and with less damage thanthe Great Depression. And this time, in my opinion, Covid-19 will be the beginning of a recession. According to my observations, every crisis or recession has a certain "catalyst". For example, the 2008 crisis was triggered by the event of the world's oldest investment bank, Lehman Brothers, declaring bankruptcy. This time it will be the Covid-19 epidemic raging around the world.

Facing the market's downtrend, many investors have "speculated" that the market has bottomed out. In your opinion, is that right?

To determine whether the market has bottomed out or not is an extremely difficult question. In my opinion, this is a very sensitive time and the market has not found an equilibrium. If you consider the risk / profit, the probability of winning is quite low, and I think the best way is to stay away.

My experience in recognizing the bottom of the market is when the bad news is starting to get saturated, the good news like the economic stimulus packages gradually appear, the overall margin on the market decreases to the maximum, M&A deals are booming and businesses and management buy stocks in large quantities.

In the context of many stocks falling deeply, is this an opportunity to buy cheap stocks? Could you make recommendations on potential stocks for investors?

Many stocks have fallen quite deeply since the event of the 17th patient of the Covid-19 incident, and I think the market will create a new price level lower than the old price level. For professional investors by value and capital market, this is a good time to choose undervalue stocks (trading prices lower than value). As for surfing investors, I think it is advisable to observe more so that the market will find the equilibrium then participate in, so it is not late. Because if the general market is bad, most stocks will also be bad.

It is difficult to choose an industry to participate in at this time because even defensive stocks will fall if the overall market falls. My opinion is still recommending stocks belonging to the retail sector, which have large market share and plummeted in this phase.

Currently, the State Securities Commission has implemented many solutions to support investors such as reviewing documents to buy treasury shares in just one day and setting up the systems for online shareholder meetings.What is your review about these solutions?

In my opinion, this is a very necessary move of the State Securities Commission to support investors and businesses in the current period. However, next time, I still expect stronger moves from the authorities to support the market to rebound strongly.

Thank you, Sir!