Expert’s recommendation after a booming trading session

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Mr. Phan Dung Khanh

In the trading session on April 6, Vietnam's stock market had a "boom" session with the ceiling increase of a series of stocks. Could you tell us about the reason for this?

The stock market has just had the strongest increase for 19 years, with an increase of nearly 5%. Although this increase was still lower than that in 2001, at that time, the stock market was still quite primitive, with about four stock symbols, so it was understandable that investors significantly purchased. Currently, with more than 1,000 stock symbols, the sharp increase in the VN-Index is rare.

There are many reasons for this issue.

Firstly, the number of people infected with Covid-19 in the world and Vietnam is decreasing and showing signs of being controlled. In Vietnam, there have been no new cases for three consecutive mornings. This has provided spiritual support to the stock market.

Secondly, the stimulus and support packages that the Government has recently launched, have helped people and businesses to overcome the pandemic.

Thirdly, the strong decline of the stock market from the beginning of the year until now has stimulated the bottom-fishing cash flow, causing cash flow to return to the market.

Currently, to prevent the pandemic, the Government issued a directive requesting people to implement social distancing and stay at home. Therefore, the stock market at this time is considered a "game" to earn money legally in Vietnam (not like the "games" about cryptocurrencies that are not allowed and encouraged by the law) and also a channel to trade freely.

What is the phenomenon of strong net selling by foreign investors recently?

In fact, the net selling by foreign investors has not only taken place in recent time but also since 2019. However, cash outflows are currently less than cash inflows. It should be noted that the "positive" level in the last year was lower than in 2018, 2017 and 2016. But this "positive" level is still higher than other markets such as in Indonesia and the Philippines.

There are various reasons for this situation, such as the pandemic or investment in many channels by foreign investors. They can invest in many different countries, when experiencing losses, they will have to sell to collect money. Whatever the reason, it is difficult for foreign investors to stop selling in the short term.

Currently, the market is supported by the domestic cash flow. This flow is mainly from individual investors rather than large organizations.

Although the stock market declined, investors are paying great attention to the stock market. What do you think about this issue?

Currently, many investors who stopped trading or were "stuck" in previous years, have invested or reopened accounts when the stock price dropped significantly. In many securities companies, investors tend to return to the market during this period. Therefore, it helped the market have a short recovery period.

However, it should be considered that this is a short-term trend rather than a medium and long-term trend. Because the economy may continue to be affected in the near future and the consequences certainly cannot be solved in a short time.

Do you have any recommendations for investors in this period?

Investors should invest in the short term but according to the medium and long-term trend, the market's dropping pressure has not ended. It should be noted that in the recent 1-2 years, the number of newly-listed stocks and listed businesses has increased, but the liquidity decreased, showing that the cash flow has also been affected.

In addition, the peak of Vietnam's stock market is in 2018 rather than this year. Therefore, investors should not confuse the impact of the Covid-19 on the stock market. This is just one of the reasons affecting the market.

The factor that caused the market’s decline from 2018 is that the "trade war" has not ended. New trade wars will occur as central banks have pumped money and lowered interest rates. Therefore, the stock market in the long term will face many problems due to being stuck between different global instabilities.

This year, there are two stock groups that bring good profits if we invest effectively, especially penny stocks. The market’s movements have shown that blue-chip stocks have only sharply increased in the recent week, but when the market experiences negative movements, cash flow tends to flow into penny stocks.

The second channel is the derivatives market. Because derivatives can benefit both ways. When the underlying market has negative signs, the derivatives market will receive huge cash flows. There are even many investors who have gained huge profits in this market.

In this period, investors should not buy and hold stocks for the long term, they should only buy and hold in the short term. It is necessary to monitor the cash flow in each period to invest effectively.

In addition, investors should focus on the derivatives market because it is profitable for investors regardless of the period, the increase or decrease is not important as long as the forecast is consistent with the trend.

Thank you!