Risk management in context of unstable stock market

In the context of a constantly adjusting and unpredictable market, the experts believe that investors can use some hedging tools for effectively managing investment portfolio.

Supporting investors in risk management

Vietnam's stock market has been significantly affected by the volatility of stock markets around the world with a strong downward trend due to the impact of the global economic downturn, pressure on inflation increased. Along with that, the trend of tightening monetary policy of many major central banks, as well as the unending geopolitical tension between Russia and Ukraine, have affected the domestic stock market to fall deeply.

In the context of a constantly adjusting and unpredictable market, the experts believe that investors can use some hedging tools for effectively managing investment portfolio.

According to experts, the market currently has three groups of investors: speculative investors who prefer short-term transactions; value investors often choose industry groups in the cyclical value sector with low P/E ratios; and investors choose growth stocks as the best stocks in industry groups to hold for the long term.

However, Mr. Le Duc Khanh, Analysis Director of VPS Securities Joint Stock Company, said that for individual customers and F0 investors who do not have investment experience, the current market context is extremely challenging and difficulty, meaning they need to cultivate knowledge and experience while investing in the market.

“To support investors, we have developed automated investment recommendation systems called FIT (Financial Intelligence Tool). Investors can access the stock trading app, the investment recommendation technology system and can filter information from technical statistics and fundamental analysis systems. Through that, investors can immediately assess whether the market is at a strong, weak or average and will be able to separate out which groups of industries are attracting cash flow, which groups are less attractive, which groups are being sold to assess the classification among industry groups, then evaluate which stocks are more popular, which stocks are being bought better. Therefore, investment decisions can be made soon," Mr. Le Duc Khanh said.

The data of the automated investment recommendation system is normally updated once every 15 minutes on the HoSE and HNX trading systems and the strategies are automatically updated every 10 days, to compare which strategies are more effective, so that investors can also consider making appropriate decisions.

Appreciating the software to support investors of securities companies, Mr. Le Long Giang, Chairman of the Vietnam Financial Advisors Association (VFCA), said that these softwares are like a coarse filter. It is possible to know which businesses have good indexes, helping investors to limit hearing information through groups, making it very easy to fall into the trap of fake price increases like the past time.

Flexible investment portfolio

Besides the automated recommendation system, experts also believe that derivatives are one of the tools to help investors effectively prevent risks. Mr. Le Duc Khanh said that a great advantage for derivatives products, VN30 index futures contracts or other derivatives in the world is a defense for the underlying securities portfolio. The expert said that, in the context of bad market movements or investors needing to hedge in the underlying securities portfolio, investors can be flexible from time to time. In the portfolio, we can hold a few stocks, bonds, or we can participate in a little derivatives market, in addition, we can save money. This is completely flexibility in portfolio management of investors, as long as it brings profitable results from now until the end of the year, helping investors not lose capital and overcome difficult times. When the market really recovers well, investors can continue to spend more money on stocks.

According to experts, in the near future, the fact that the management agency is trying to put into operation the new technology system of the stock market (the KRX system) is also a factor that will help investors have a diversity in investment activities in the future.

The State Securities Commission, the Securities Depository Center also researched, operated and implemented the Central Clearing System, to help investors trade on T+0 day, while at the same time developing other derivative securities products. Besides the VN30 index, the research suggested that the new index set of 50, 100, 150 or more would be applied. Then, the derivatives market on the new index would operate smoothly, avoiding fluctuations and phenomenon of manipulation, facilitating transactions for domestic and foreign individual investors as well as institutional investors.

According to Mr. Le Long Giang, if the T+0 system is put into operation, it will be a breakthrough, not only for the management agency, but also for individual investors. Investors will feel it is more fair and thereby motivate them to participate more in the market more and more sustainable. After the T+0 system is put into operation, it is certain that foreign investment flows will be more and more stable in the Vietnamese market.