Vietnam's stock market plunge offers opportunity for cash holders

The Vietnamese stock market may continue negative developments in the short term, but in the long term it is still the No. 1 investment channel; therefore, the current corrections offer cash holders a good opportunity to accumulate stocks, said experts.

Over the past two months, the stock market has suddenly plummeted, with the VN-Index on the Ho Chi Minh Stock Exchange (HoSE) falling from 1,243 points to 1,051 points, accompanied by a decline in liquidity that now stands at about VND11-12 trillion ($447.74 million) per session.

At a recent seminar entitled "Finding drivers for the stock market in the last months of the year" in HCMC, Nguyen Anh Duc, managing director of institutional sales at Saigon Securities (SSI), assessed that the above developments are relative movements of the market, but not overreaction.

At the beginning of the year, the market faced many problems such as a rising USD/VND exchange rate, sharp fluctuations in interest rates, a corporate bond crisis, and shrinking domestic consumption and FDI flows.

In response, the government took strong measures such as allowing businesses to repay corporate bonds over two years, cutting taxes and policy interest rates, and accelerating public investment disbursement, helping stabilize the macroeconomic situation and remove the risk of system failure. Thanks to that, cash flow returned to the stock market, resulting in strong liquidity growth from April to August.

However, since the end of August, new worries about exchange rates and geopolitics have led to margin calls and stock prices having dropped rapidly with foreign investors net selling, Duc said, noting the market's decline since September is understandable.

Phan Dung Khanh, a securities expert, also acknowledged that the Vietnamese stock market has experienced ups and downs in the past two months.

“Looking back, after the market increased sharply for eight months, many stocks had a higher P/E (price to earnings) ratio than in the pre-pandemic period. Meanwhile, the valuation, economic growth rate, production and business activities of enterprises did not reflect that,” he said.

Many companies saw their stock prices increase two or three, even five times, but their business results only changed from loss to less loss, he added.

Therefore, Khanh held that the recent correction is not that surprising. Thanks to that, investors with a high proportion of cash have the opportunity to accumulate more shares in the near future.

The market still has many supporting factors, notably the government’s extremely flexible monitoring policies, he said, adding the economy has seen improved macroeconomic indicators in the last months of the year.

“This is an opportunity for cash holders. Many investors complained that the stock market's gaining streak in the first eight months of the year made them impatient. Now the opportunity has come," Khanh said.

Sharing the same opinion, Dinh Duc Minh, investment director at VinaCapital Fund Management, commented that the current market is negative and volatile as investors are waiting for things to get better. 2024 will have more positive stories for the market, including economic recovery, more positive business results among listed companies, and the prospect of Vietnam’s upgrade to an emerging market status.

The VN-Index of the HoSE, the main gauge in Vietnam, fell 18.22 points or 1.72% to 1,042.40 on Monday, its lowest since early May. Trading value on the HoSE decreased by 26% to VND10.128 trillion ($412.29 million) on the same day.

Foreign investors were net sellers on the major bourse to the tune of VND88 billion ($3.58 million), mainly net selling VHM of property giant Vinhomes and TCB of Techcombank.