Vietnam The stock market plunge yesterday shocked investors.
Yingwei financial data showed that the Vietnam VN index fell 5.11% on Tuesday, erasing almost all gains since January. This is the biggest single-day decline of the benchmark index since July 27 last year, when the VN index fell 5.32%.
Vietnam's large-cap index VN30 index also closed down 5.63%, with all 30 constituent stocks closing down, of which 8 stocks hit the limit. This basket of stocks accounted for nearly half of the Vietnamese stock market trading volume that day.
What happened to the stock market of Asian countries that performed well in 2020?
VN index has been trending since last year
The reason for the plunge: profit-taking pressure + retail investors' herd effect
According to VNDirect Securities analysts, "Many investors, especially novices, have fallen into a panic selling state."
In the early trading that day, due to the surge in selling instructions in a short period of time, the trading system of the Ho Chi Minh Stock Exchange collapsed for a time, lasting nearly 20 minutes. On the same day, the exchange's total trading volume soared to a record 18 trillion Vietnamese Dong (approximately US$780 million).
In fact, it is not surprising that the VN index has undergone a large-scale pullback after experiencing a long period of continuous rise. Throughout 2020, the Vietnam VN index rose 14.9%, and rose 8% this year before Tuesday's plunge. VNDirect Securities analysts pointed out that the pressure of profit-taking will dominate the Chinese New Year (Tet Holiday) in Vietnam, that is, before February 12.
In addition to the sharp rise in the stock index, the recent influx of retail investors is an important reason for the "step-by-step plunge" in the market. As the epidemic weakens the attractiveness of other investment channels such as savings and real estate, the rise of the VN index is eye-catching and new investors are flocking.
According to VNEexpress, VNDirect added 7,295 new accounts in the first two weeks of the new year; another brokerage firm, SSI Securities, said that its daily new accounts were about 80, about 70% of them were novice investors, and they did not have any investment knowledge or had any investment experience.
. According to data from the custody of securities in Vietnam, in December last year, the number of retail investors entering the country's stock market reached a record 60,000, bringing the number of new retail investors to 392,000 throughout the year, twice that of 2019.
These retail investors are often too optimistic and lack experience in the violent fluctuations in the market. They are prone to panic when the stock market begins to fall, creating a "herd effect". It is not difficult to understand the flash crash of Vietnam's stock market on Tuesday.
Retail investors panic and sell off, foreign investors are "unmoved"
Compared with retail investors' escape, foreign investors in Vietnam's stock market seem to be unaffected. On Tuesday, foreign capital bought nearly 130 billion Vietnamese dong, focusing on Vietnam's largest shopping mall group Vincom Retail JSC (HM:VRE) and real estate giant Vinhomes JSC (HM:VHM).
This shows to a certain extent that foreign capital is still optimistic about the Vietnamese stock market in 2021.
Vietnam Statistics Bureau said at the end of December that due to the impact of the new crown epidemic, Vietnam's economic growth in 2020 was 2.91%, the lowest growth rate in more than 30 years; in the fourth quarter, the country's economy grew by 4.48%. The updated version of the Vietnam Economic Report previously released by the World Bank predicts that Vietnam's GDP will grow by 6.8% in 2021 and will maintain a growth rate of 6.5% in the next few years.
SSI Securities predicts that Vietnamese listed companies' profits are expected to grow 23% this year after falling 17% in 2020; while the average P/E ratio of the VN index may exceed the highest level in the past three years - the median P/E ratio of the VN index in fiscal years 2018 to 2020 was 16.4, with a maximum of 21.6 set on March 22, 2018. The brokerage predicts that the VN index is expected to grow by 12.3% in 2021, with a price-to-earnings ratio of around 18.
Nevertheless, the selling pressure in Vietnam stock market may not have completely subsided in the short term. On Wednesday, the VN index closed up 0.33% to 1134.68 points. VNDirect analysts say the index is likely to be testing the critical 1100-point trend line. A Vietcombank Securities broker said the VN index could fall further in the next few trading days and advised investors to wait and see for at least two weeks.
