No longer easy gains

With the recent strong correction, up to 899 stocks had rallied against end-2020, with 235 stocks posting a price rise from 20% upwards. Of note, up to 40 stocks surged from 50% upwards, and some even recorded a double price rise after only 10 trading sessions of the first two weeks of January 2021.

Strong money flows helped investors make easy profit with almost all stocks during the early days of the year, turning the stock market into the easiest money making channels over the past many years. Many new stock accounts have been opened, liquidity has surged and continuously made records, causing frequent overloads during the ends of the trading sessions on the Hochiminh Stock Exchange (HOSE) though the minimum trading lot was raised to 100 shares from the beginning of the year.

Nevertheless, these developments seemed to be the warning signals for a correction, which immediately occurred afterwards. The drastic fall of the VN-Index on January 19, 2021 would probably be mentioned many years  afterwards, and may have caused quite a big panic among many investors, especially newcomers.

The sudden, shocking correction will definitely affect not only existing investors but also those intending to join the market, which may stall the money flow in the upcoming time, especially when there are more warnings against asset bubbles or highly priced stocks.

This is a regrettable consequence. When funds from other investment channels were massively poured into the stock market and everybody was enthusiastic with money making opportunities, the recent strong correction seems to be a “blow,” forcing quite a few people to wake up to realize the severity of the stock market and to rethink their investment strategies and decisions.

Differentiation inevitable

After drastic falls last week, the market has recovered and taken back half of the points lost, but suspicion remains overwhelming, manifested by the liquidity plunge and the narrow fluctuation of the stock index. Quite a few investors are waiting for recovery sessions to escape the market, while bottom fishers in previous sessions may take profit, with the “quick fight, quick victory” being the prioritized strategy when the market has signs of strong volatility and instability.

Though the long-term growth prospect is bright with positive forecasts for this year, many investors obviously do not want to keep their stock holdings before the upcoming long Tet holidays because they are concerned over unexpected information during this time and want to reduce their margin loans so as not to pay interest during Tet. It should be remembered that after Tet last year, the market took a nosedive upon its reopening, as news about the Covid-19 spread during the holidays frightened investors.

Further, the story of easy gains from stock investment previously may not repeat any more. It’s a truth which investors must accept. Instead, funds will differentiate and flow to businesses having their “own stories.” Therefore, investors, especially F0 investors, could lose all their gains over the past time if they are not cautious and do not pick the right stocks.

Enterprises with strong growth in business results in Q4 2020 beyond investors’ expectation will still be the focus of the market. Statistics show that by the end of last week, among nearly 310 enterprises on the HOSE and the Hanoi Stock Exchange (HNX) who have published their Q4 business results, more than 50% recorded positive profit growth versus the same period in 2019.

Nevertheless, attention should be paid to the “sell with the news” effect. For stocks of enterprises with good profits which are up to investors’ expectation and reflect the strong price rally last time, the publication of their business results is also an opportunity for many investors to take profit. The development of the stocks in recent days is the most visible evidence.

Still, it should be noted that the freshly issued Circular 121/TT-BTC, to be effective from February 15, 2021, with the regulation that allows the debt-to-equity ratio of securities companies to increase from two times to five times, may have a positive impact on the stock market in general and the business operations of securities companies in particular in the upcoming time.

Money can also flow to stocks of companies with capital divestment, which was a factor to boost prices of many stocks last year. In particular, the price boost for this group of stocks will be further supported when the Government, right at the start of this year, urged management agencies to issue guidelines for Decree 140/2020/ND-CP to accelerate the equitization and divestment of State-owned enterprises in 2021.

In addition, stocks which benefit from the economic recovery when the Covid-19 vaccine is available, free trade agreements and the shift of foreign investment capital to Vietnam as well as the Government’s boost of public investment in big infrastructure projects will continue to attract investors.

In reality, many stocks still rallied strongly during the recent correction, such as MWG, PNJ, VGT, TNG, GIL, KBC and SIP.