Global stocks plunge: Need calm to find opportunities in risks

VN-Index has just recorded a week of record decline of 5.45%.

However, investors should not be too worried, because if carefully observing and seizing opportunities, this will be an effective investment time.

Market affected by COVID-19 epidemic

Vietnam's stock market has just had a trading week (from February 23 to February 27), with the turbulent VN-Index recording a record decline of 5.45%. This is the largest reduction since the end of October 2018 and is a shock to investors. After a week of decline, the VN-Index dropped to below 885 points despite strong support signals such as: restructuring activities of reference funds according to the indexes of MSCI Frontier Market; or big transactions of up to trillions of dong of large stocks such as VNM, YEG hat EIB at the end of February. The decline often increasedduring the session, only stopping and narrowing the decline at the end of the session phase.

The decline of the stock market not only occurred in our country, but also occurred in most countries around the world, when investors reacted negatively to the global spread of the COVID-19 epidemic. Also, this week, the US stock market fell for the worst in more than a decade with all major indices falling more than 10% from the peak set just a week earlier.

The Dow Jones Industrial Average closed at 25,409 points (down 10.54%); the S&P 500 closed at 2,954 points (down 9.3%) and the Nasdaq Composite closed at 8,567 points (down 6.76%). Only the Cboe (VIX) soared to nearly 50 points on Friday morning, the highest level since the 2008 global financial crisis. In addition, the Asian stock market did not. The exception was when the group fell in the week of 23-27 February. Accordingly, Hong Kong stocks fell 4.32% per week; Japan's Nikkei 225 decreased by 9.75%; China's Shanghai Composite index closed at 2,880 points (4.86% reduction); Topic (South Korea) decreased by 8.13%.

This movement shows that the stock market in general is under the same impact. The spread of the COVID-19 epidemic across the country has led to rising concerns about the risk of delaying global economic growth. The main reason for the decline was the strong net selling of foreign investors during the recent period. The move to sell stocks, buy gold and bonds has appearedon a global scale. Foreigners' net selling transactions took place in most Asian stock markets, including Vietnam. In Vietnam, statistics showed that at the end of the first two months, foreign investors were net sellers on all three floors with a total value of over VND1,174 billion, contrary to the same period of the previous year when foreign investors were net buyers inthree exchanges with avalue of VND6,752 billion. In China, last week, foreign investors also net sold 870 million USD, Korean securities were net sold 868 million USD.

According to PhanLinh, CEO of Take Profit Consulting and Investment Vietnam Co., Ltd., the COVID-19 epidemic has affected the total supply and demand in Vietnam. Accordingly, the aviation industry has decreased in the number of passengers flying, with fares continuously lowered. The beverage industry, especially beer and alcohol, also saw a decline in sales due to the limited concentration. And the retail industry is gloomy due to lower demand.

"At present, there is no longer a case of COVID-19 in Vietnam, which proves its ability to prevent the disease quite well. Besides, the EVFTA has also been signed. The stock market has yet to see a positive sign, showing that investors are very cautious and react weakly to good news,"PhanLinh said.

Many economists believe that it is reasonable to blame the market decline due to the COVID-19 epidemic. But that does not mean that when Vietnam successfully controls the disease, the market will increase accordingly. The stock market is reflecting the risks that will appear in the near future when global and Vietnamese macroeconomic data isreleased at the end of March. Currently, investors are expecting positive signs in global epidemic control are likely to take more time and the stock market will still be affected by related information in the near future.

Waiting for the right time

According to Do Bao Ngoc, Deputy General Director of Vietnam Construction Securities Company, although Vietnam's stock market is under pressure from foreign investors, the scale of net selling in Vietnam market is low compared to other markets in Asia.

“In a comparative perspective, basically, Vietnam is still one of the countries with the fastest GDP growth rates in the world, stable macroeconomic factors and many other favorable conditions, as well as other incentives of the Government for foreign investors. Therefore,Ibelieve that when the epidemic is repelled, foreign capital will soon return to Vietnam market when the P / E valuation is very attractive through the recent declines,"said Do Bao Ngoc.

Commenting on the market, PhanLinh said that the stock market will continue to drop to 830-840 points. The "sideways" situation will last at least until the first quarter of 2020 until the enterprises have finished their financial statements. At the same time, the market will wait for the results of COVID-19 epidemic control.

"When the market goes down, not every stock code goes down. I think bank stocks will still be the main force of finance, the foundation for the market. In addition, bank stocks are not affected. Directly affected when the market plummets, it is an opportunity to buy good bank shares at attractive prices, while electricity stocks not affected by COVID-19 can also be observed. In addition, sugar stocks from September 2019 so far have increased by about 50% is also a good code for investors,"PhanLinh suggested to investors.

DoBao Ngoc also said that when the epidemic is under control, the opportunity to buy cheap stocks to catch up with the market's recovery is what both foreign and domestic investors are expecting. Therefore, this is a time when investors need to be patient to "wait for the right time". At that time, it is the foreign investment funds that will be the leading group in net buying of Vietnamese stocks, playing a leading role in the strong rally.