As usual, when the economy shows signs of instability, investment will slow down, so in the context of the current rising market, what are the opportunities for investors, especially individual investors?
1. Address the problem
In the period of 2016 - 2020, Vietnam's stock market (stock market) witnessed strong fluctuations of the VN-Index. In January 2016, when the VN-Index fluctuated around the threshold of 550 points, after 2 years of continuous growth, the VN-Index surpassed the 1,200 point mark in April 2018. The Covid-19 pandemic that started in late 2019 and early 2020 has negatively impacted the world economy, including Vietnam. With the sharp decrease in early 2020 due to the impact of the Covid-19 pandemic, the stock markets still recorded a good increase in the second half of the year, in which the VN-Index increased by nearly 15% with the emphasis on the strong increase in cash flow in the trading sessions. end of the year. VN-Index continued to increase in the first quarter of 2021, the money flow was poured into the market with increasing amount. As usual, when the economy shows signs of instability, investment will slow down, so in the context of the current rising market, what are the opportunities for investors, especially individual investors?
2. Investment picture of individual investors on Vietnam stock market
2.1. Transactions of individual investors
In Vietnam, individual investors have played an important role in the development of the market during the past 20 years. Following Figure 1, from 2016 to 2020, the trading volume and value of individual investors has always been around 80%. Although in 2019, this rate dropped to the lowest (79%) but immediately returned to 86% in the second half of 2020 and 88% in January 2021. The decline in early 2020 is due to the significant impacts of the Covid-19 pandemic.
2.2. Number of accounts
According to the latest updated report from the Securities Depository Center (VSD), by the end of May 2021, the total number of investor accounts trading securities on the Vietnamese market reached more than 3.25 million, in There were nearly 99% accounts of individuals in the country, an increase of more than 742,000 accounts compared to the same period last year.
The growth of the stock market in 2020 and the first months of 2021 despite the Covid-19 pandemic can be explained by the following reasons:
Firstly, the Covid-19 pandemic broke out in the world and Vietnam, causing business activities and social life in many places to come to a halt, many businesses cut workers, and narrowed business and investment activities. From a negative perspective, the epidemic and the blockade and distance orders make people stay at home more, however, it is advantageous because they have a lot of free time and want to find more income. It is difficult to find an investment channel that is more convenient than stocks. Just sitting at home, you can learn most of the information about the stocks that interest you and can place orders online or call the brokerage staff of the securities company to place orders. This is called the TINA application (There Is No Alternative - there is no better alternative).
Second, Vietnam also adjusted operating interest rates to support the economy, the interest rate level decreased, making safe investment channels such as savings unattractive because of their very high profitability. short. As a result, stocks become attractive compared to traditional investment channels.
The stock market is often seen as a mirror reflecting the economy: when the economy is good, the stock market goes up and vice versa, when the economy is in recession, the stock market goes down. But the Covid-19 pandemic changed everything, while the US economy and many other countries fell into recession, the stock market flourished.
Third, the TINA effect appeared in Vietnam in 2020, causing the VN-Index to continuously set new peaks, reaching more than 1,200 points in January 2021. But the milestone of 1,200 points in January 2021 is far different from 1,200 points in the 2007 period. At the time of 2007, although there was also a situation of houses and people talking about securities, the amount of capital entering the market was still not too sudden compared to the previous year.
Compared with the previous period, the number of listed companies and the size of the stock market were still small compared to the economy.
The cash flow into securities caused the price of many stocks to increase continuously, making those who are slow to feel even more impatient, and the FOMO (Fear Of Missing Out) effect works not only for each individual. individual stocks but with the entire stock market.
Fourth, it is quite understandable that investors hold stocks in a short time: Faced with the complicated and unpredictable developments of the Covid-19 pandemic, the economy as well as the world and domestic stock markets can be affected. fluctuations appear. Quickly participating and selling stocks to gain short-term profits in order to minimize risks before market movements is a common sentiment of many investors.
3. Opportunities of individual investors on the stock market under the impact of the Covid-19 pandemic
3.1. There is still a lot of room for growth for the stock market
The success of the Government of Vietnam in the prevention and control of the Covid-19 pandemic not only keeps the society peaceful and the economy grows, but also contributes to enhancing the image and position of Vietnam in the world. contributing to making Vietnam a safe and attractive destination for foreign investors. This will be a huge plus point for the future of the economy and the future of the stock market in the coming years. In addition, rounds of vaccination against Covid-19 have begun in most markets in the region, helping to strengthen investor confidence.
The appearance of a new class of investors (F0) is consistent with the development laws of the economy. In the context of the Covid-19 pandemic, people diversify investment channels by keeping a little bit of cash, gold and the rest are corporate shares. Currently, according to statistics, half of the US population is directly or indirectly involved in securities investment, while Vietnam strives to reach 5% of the population by 2025 to open a stock account, with room for growth. more.
The effect of TINA and FOMO on the stock market in 2020 may continue to be stronger in 2021. Cash flow from savings channels is pouring into securities. Once a trend has formed, it
will not be easy to reverse, unless there is a large enough surge factor.
3.2. Goods on the market increase and diversify
An improved global economic outlook and progress on a Covid-19 vaccine boosted bond yields in emerging East Asia. In the context of the bond market of countries in the region increasing, Vietnam's domestic currency bond market also increased by 8.1% compared to the third quarter of 2020, reaching $71 billion at the end of December 2020. by a steady increase in both government bonds and corporate bonds.
Government bonds of Vietnam increased 7.1% compared to the third quarter of 2020, reaching 58.8 billion USD at the end of December 2020, accounting for 82.8% of the total bond volume of the country. Corporate bonds also maintained growth, with an increase of 13.6% compared to the third quarter of 2020 and 169.5% over the same period last year, reaching $12.2 billion at the end of December 2020.
According to the Vietnam Bond Market Association, in 2020, the market received a total value of 368,000 billion VND of corporate bonds, up 24% compared to 2019. In particular, green bonds are a trend. position and open up new capital mobilization channels for long-term investment projects
3.3. Market liquidity is high
Strong increase in liquidity is the highlight of Vietnam's stock market in 2020, especially in the first half of 2021. According to information from the Ho Chi Minh City Stock Exchange (HOSE), the trading session ended on 31st. On May 5, 2021, the stock indexes on HOSE maintained an impressive growth sequence during the first 5 months of 2021. Accordingly, the VN-Index reached 1,328.5 points, up 7.15% compared to the previous month. April 2021 and increased by 20.31% compared to the end of 2020. The liquidity in May 2021 reached the highest level ever, with the average trading value of over 21,937 billion VND/session.
New cash flow from investor F0 brings high liquidity to the stock market. Capital flows from exchange-traded funds (ETFs) also have a positive impact on Vietnam's stock market in 2020 and the first months of 2021. In addition to familiar ETFs such as FTSE ETF, VFM VN30 or VNM ETF, the boom The explosion of domestic ETFs also shows the attractiveness of Vietnam's stock market.
The market's high liquidity comes from two reasons:
(i) First, Vietnam's economy in 2021 is considered to have a higher chance of recovery than many other countries thanks to management and control. Good Covid-19 pandemic. Vietnam also has many opportunities to benefit from the current shift of supply chains to countries with low production costs;
(ii) Besides, the domestic stock market in 2021 will have many positive changes in quality; Internal factors of listed companies are also relatively good. The business results of listed companies according to the financial statements of the fourth quarter of 2020 (unaudited) recorded 82% of enterprises as profitable.
Continued to Part 2: https://stockthinktank.wixsite.com/home/post/personal-investment-on-the-vietnamese-stock-market-under-the-impact-of-the-covid-19-pandemic-pt-2
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