The stock market enters unprofitable areas

29-Oct-2020 Intellasia | Dau tu Chung khoan | 6:02 AM Print This Post

While stocks were maintaining their momentum, profit opportunities were becoming increasingly difficult.

The rate of increase after T+3 (the settlement dates of security transactions occurred on a transaction date plus three days) was below 50%

Since September, the market liquidity had increased by over 30 percent compared to the average at the beginning of the year. The continuous cash flow had helped the market grow very well in the past period. In the last session of the week, the VN Index surpassed 960 points and recorded over 11%.

However, in each stock, the number of red colours was taking up a high proportion. As in the session on October 23, on the Hochiminh Stock Exchange (HOSE), there were 160 shares decreased. The market’s uptrend was kept pace by some pillars.

Notable data was provided by Hoang Thach Lan, Individual Customer Investment Advisory director, Viet Dragon Securities Company (VDSC).

Accordingly, VDSC statistics in the past one trading week on the number of stocks increasing/decreasing after T+3, T+4 and T+5 showed that the rate of increase was below 50%. When the investor bought new stock, the probability of profit after T+3 was less than 50%.

Of course, some industries could gain a 50 percent higher profit, for example, banking, telecommunications, iron and steel. In contrast, for some industries such as food, petroleum distribution, oil and gas, aviation, the profitability was below 50%.

In fact, after a long rally, the market had turned to a period of strong differentiation due to the announcement of Q3 business results, leading to individual waves of each enterprise.

Not to mention, the market was also affected in portfolio reviews and derivative contract closing sessions. Profit-taking selling pressure had increased significantly on a large scale. Even some stocks witnessed an intense correction, such as DBC, CTD, and so on.

Nguyen Hong Khanh, director of Analysis, Vietnam International Securities Company, said that blue-chip stocks, especially banking stocks, would also have a slightly distorted impact on the index.

However, according to Khanh, this should be seen as a positive aspect because the market was still trading well and growing in general. One factor supporting the current market was that other investment channels such as real estate, gold, and forex were slowing down, and cash flow might continue to pour into stocks.

Cash flow divergence

Explaining why the cash flow tended to be attracted to large-cap stocks, Dinh Quang Hinh, Head of Market Strategy, Analysis Division, VNDirect Securities Company, said that the market’s increasing momentum in August and September was relatively wide, spread to most stock groups and levelled off in a recent month.

The cash flow shifted to drag some pillars with their own stories and take profits in small and medium caps. Therefore, finding profits in the market in a recent month depended a lot on choosing the right stocks, not as easy as it was at the beginning of August.

According to Hinh, recently, MSCI had announced its plan to upgrade the Kuwaiti market to the emerging market in five steps, starting from the next November review. This would increase Vietnamese stocks’ proportion in MSCI’s frontier market indices (VIC, VNM, HPG).

That was positive news in the short term for large-cap stocks. The uptrend would focus mainly on large-cap stocks before cash flow could spread to small and medium cap stocks.

According to Hoang Thach Lan, the market was in the peak period of the Q3 financial report season. Investors would read dozens of new updates every day.

Lan expected that stocks in banking, securities, insurance, pharmaceutical, and rubber industries would receive positive news. Nevertheless, industrial stocks were harder to forecast, so investors had to find information from these companies’ Q2/2020 financial statements.

Since the beginning of October, the banking stocks had maintained their performance when simultaneously increasing, such as VCB, BID, CTG, TCB, and MBB. Banking stocks were still a priority investment for investors during the period. There were many converging factors in the short term, such as changing exchanges, listing new shares, and paying dividends to increase state-owned banks’ capital.

Meanwhile, the stock market’s strong growth in points and liquidity helped the securities group benefit first in brokerage and proprietary trading.

Besides, in the context that the end of the year economy was going into the recovery and accelerating phase after the epidemic, it was likely that many sectors would return to the previous growth momentum. Some sectors were recovering and having profitable growth, such as steel, retail, industrial real estate, and fertiliser, with many stocks growing well.

Tran Duc Anh, director of the strategy and macro, KB Securities Corporation, said that, unlike the previous season of reporting business results, the Q3 earnings result would verify more clearly about enterprises’ resilience after the Covid-19 epidemic. Thus, this business result reporting season had a long-term meaning than merely a reflection of the past quarter’s business performance.

Firms recorded strong growth thanks to their core businesses and expected an increase in stock prices to continue, although short-term selling pressure might appear before the news was released, said Duc Anh.

However, for investors who were addicted to surfing, experts also warned to pay attention to the strategy of buying/selling by T+ to prevent unexpected market reversal.

 

Category: Stocks, Vietnam

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