Market dives in historic crash

The Vietnamese stock market sunk deep into the red on Monday, with VN-Index losing a historic 68.31 points to close at 1,310.92.

The market in the early morning was negative with a cautious cash flow. After nearly one hour of slight shaking in a narrow range, the selling force increased on a large scale, quickly driving the market into the red.

The drop was extended into the afternoon when blue-chips sold strongly and many groups of stocks hit the floor.

The main index at one point lost nearly 80 points, the biggest decrease ever, “piercing” the threshold of 1,300 points before demand reappeared to help the index recover a bit in ATC (at the close order) session. ATC is an order to buy or sell a stock at the closing price.

All 30 stocks in the VN30 basket, which tracks the price of 30 leading stocks in terms of market cap and liquidity on the Ho Chi Minh Stock Exchange (HoSE), were in the red, of which 16 fell to the floor and a series of stocks fell by more than 5%, including HDB, KDH, MBB, VRE, MSN, ACB, and VJC.

This movement pulled VN30-Index down 77.93 points to 1,366.39 points, with transaction value reaching VND10,145 billion ($441 million), equivalent to 46% of the HoSE figure.

Small and medium-sized stocks also failed to avoid the loop with selling pressure at a high level, pulling VNSmallCap and VNMidcap down by 5.38% and 5.85%, respectively.

VN-Index closed the session on Monday at 1,310.92 points, down 68.31 points, with 443 losers (171 stocks hitting the floor) and only 37 gainers. HNX-Index decreased by 21.61 points (6.02%) to 337.51 points, while UpCoM-Index decreased by 4.61 points (4.43%) to 99.54 points. UpCom is the unlisted public company market.

On the three exchanges, 868 stocks were losers (240 stocks hit the floor) and 202 gainers, with total transaction value at VND25,551 billion ($1.11 billion), down 11% compared to the last session of last week.

Most groups of stocks were under strong selling pressure with red the overwhelming color. Many groups recorded stocks hitting the floor, likes real estate, securities, construction, steel, along with oil and gas.

Transactions by foreign investors were another highlight since they remained net buyers. They recorded a net buying value of VND239 billion ($10.4 million) on HoSE. This group focused on buying SBT ( Thanh Thanh Cong-Bien Hoa, VND119 billion), VRE (Vincom Retail, VND63 billion), DGC (Duc Giang Chemicals Group, VND55.5 billion), and VNM (Vietnam Dairy Products, VND51 billion).

In the opposite direction, foreign investors strongly sold HPG (Hoa Phat Group, VND118 billion), DXG (Dat Xanh Group, VND73 billion), and VCB (Vietcombank, VND38 billion).

This was the fifth session in a row that this group spent in a net buying position.

Analysts said that the main cause of VN-Index falling vertically is “margin calls”. A margin call occurs if your margin account value falls below the brokerage firm's maintenance margin requirement. A margin call is a warning that you need to bring your margin account back into good standing. You might have to deposit cash or additional securities into your account, or you might need to sell securities to increase the ratio of assets you own entirely to the amount you borrowed.

Vo Cong Minh, sales director in charge of retail customers at ACB Securities, argued that the main reason why the VN-Index at one point lost 80 points was that securities companies issued margin calls when the index just reversed from rising to falling, leading to investors with weak sentiment to sell. That accumulated into a wave of selling in the afternoon.

Nguyen The Minh, chief analyst at Yuanta Securities, also ascribed the market drop to margin calls.