With the VN-Index fall of 9 percent in just the past two weeks, the market capitalization of Ho Chi Minh City stock exchange has lost about US$20 billion. Although the index decreased by 9 percent, many investors, especially those holding speculative stocks and real estate, may have lost 30 percent to 50 percent in their accounts not to mention those buying stocks on the margin who can lose double or triple, depending on the loan ratio.
Mr. Hong Minh in Ho Chi Minh City’s District 3, an investor with 6 years of experience on the stock market said that two weeks ago, his account had a profit of nearly 20 percent, but now he is suffering a reversed loss of nearly 20 percent, which is a decrease of about 40 percent in just two recent weeks.
He moaned that despite selling to cut losses on speculative stocks after four sessions of hitting the floor price, stocks in the portfolio such as securities and real estate also fell sharply. As he borrowed a margin loan to catch the bottom after the market fell for the fifth consecutive session, but then the market continued to fall, so he still suffered a heavy loss.
Other investors have fallen into the same fate recently. After the investigation agency jumped into investigation, stocks in the FLC Group’s ecosystem related to Trinh Van Quyet including seven stock codes, namely FLC, ROS, HAI, AMD, KLF, ART , TGG, APG, AGM, SMT, BII, VKC, DDV have seen a reduction, loss of liquidity, all hit the floor price for 3 consecutive sessions. In addition, more and more stocks of real estate, banking, and securities that relate to bonds, were sold. Banking and real estate are two industry groups that account for 60 percent-70 percent of the market capitalization, causing the VN-Index to plunge.
The effect of ‘melting snow’ took place when investors sold off a series of speculative stocks that increased hot from mid-2021 while businesses haven’t been profitable; as a result, these stocks drastically plummeted. Consequently, securities companies had to sell off mortgage stocks of stocks in margin investors' accounts, including stocks with good fundamentals to recover debts, so stock prices dropped sharply. This leads to many investors on the stock market getting infected; worse, their accounts have no money when buying ‘hot’ stocks on margin.
Before the shock drop in the stock market, Mr. Nguyen Duy Hung, Chairman of the Board of Directors of SSI Securities Company, said that the authorities' control of the trading of some groups manipulating the market, as well as correcting the issuance of corporate bonds have affected the liquidity and stock price in the market. However, one of the main reasons leading to the drop in the Vietnamese stock market is that interest rates surged, which makes the cost of capital no longer cheap.
This trend occurs not only in the Vietnam stock market but also in the world stock market, especially when the money supply is under control. Specifically, since the beginning of the year, the US stock market has decreased by 6.4 percent, South Korea by 9 percent, Hong Kong by 9.7 percent, and China by 16.5 percent. Statistics in the past also showed that the Interest rate hikes usually only have a negative effect on stock prices for one or two months, then the stock price almost reaches a higher level than before the interest rate hike, said Mr. Hung.
According to founder of FIDT Asset Management Consulting Huynh Minh Tuan, the Vietnamese stock market has seen a legal purge for the very first time. Currently, the cash flow is declining, so the stock market is facing a relatively difficult period, as a measure to ‘purify’ the market. Therefore, investors should not be panicking leading to a sell-off of stocks at all costs, but review the portfolio, and adjust the expectation that long-term investment will have better results, maybe six months or more.
Ms. Nguyen Hoai Thu, Managing Director of VinaCapital Securities and Bond Investment Division, also said that the investigation and handling of violations in the stock market will affect investors’ psychology in the immediate future, but it is a positive sign for the development of the stock market in the long run.
Strict sanctions will increase investors' trust in the market, as evidenced by the fact that foreign investors are aiming for the prospect of upgrading Vietnamese securities from the frontier market to the emerging market. Ms. Thu said that a few negative events are affecting the stock market annually, but with the positive outlook of the Vietnamese economy and listed companies, the market always overcomes difficulties to rise to a high level.
Sharing the same opinion, Mr. Nguyen Duy Hung provided information that, according to Bloomberg, the forecasted Vietnamese market’s price-to-earnings (P/E) ratio - the ratio for valuing a company that measures its current share price relative to its per-share earnings - in 2022 is at 13.5, which is considered quite low while many professions will benefit from the current situation of the world.
Recently, Prime Minister Pham Minh Chinh said at the conference to develop a safe, transparent, efficient, and sustainable capital market that the capital market and the money market have had strong development over the past time in terms of scale, financial capacity, management, and technology.
However, some organizations and individuals have particularly violated the law when participating in the market. The Prime Minister emphasized that the handling is necessary to deter people from breaching the regulations. This is also a necessary step to clean up the market so that the market can develop better and healthier, contributing to protecting the legitimate rights and interests of the majority of honest investors and businesses.
Minister of Finance Ho Duc Phoc said that the Ministry of Finance has been making many drastic moves in perfecting the legal framework, strengthening management, supervision, and inspection to stabilize the market activities.
The Ministry kept issuing warnings to investors in order to help the stock market and corporate bond market develop safely and sustainably. Having seen the government’s efforts to control the market, the foreign investor community is very optimistic about Vietnam's stock market. In the past 5 weeks, foreign investors have net bought VND3,589 billion in stocks and fund certificates, proving that Vietnam's stock market is very attractive.