Vietnam's stock market recently experienced a fluctuation third quarter due to the return of the Covid-19 pandemic. However, thanks to good control of the pandemic as well as maintaining positive growth momentum for the economy, the VN-Index is forecast to continue to maintain recovery momentum and wait for investment flows.

The VN-Index ranked fourth in markets with the strongest increase
in September worldwide. Photo Internet.

"New" cashflow still pours into the market

Vietnam's stock market ended September with all three ralliedindexes including VN-Index, HNX-Index and UPCoM-Index compared to the previous month. At the end of the session on September 30, the VN-Index stood at 905.21 points, an increase of 2.98%, ranking forth in the top 10 of the largest rallied markets in September after Mongolia (4.27%), Turkey (4.06%) and Denmark (3.48%).

In September, although the increase of the VN-Index fell compared to August (10.43% - the strongest increase in the world), the liquidity in this month was superior. Average trading volume in September topped 352 million shares per session on HoSE, equivalent to an increase of 23% compared to August.

Average trading value also increased by 31% to 6,644 billion VND. Capitalisation on HoSE reached 3.2 million billion dong by September 30, up 2.94% compared to the end of August, equivalent to an increase of 91,722 billion dong (US$ 4 billion).

However, according to Phan Dung Khanh, Director of Investment Advisory, Maybank Kim Eng Vietnam Securities Company, although the stock market increased rapidly and the VN-Index was among the top indexes with the strongest increase in the world, the VN-Index was still at nearly 100 points distance from top of the beginning of the year, at a 300 points distance from the historic top, although it had risen more than 40% since the bottom this year.

Along with that, according to Khanh, although the increase of HNX-Index was equal to that of the VN-Index and the increase of UPCOM-Index was less (about 30% from the bottom), but both surpassed the peak at the beginning of the year, it showed that the HoSE was affected much more by stocks of blue-chips. This situation is quite similar to the US stock market when the three main indices, the Nasdaq and the S& P500, peaked the peak and surpassed the peak of the beginning of year, but the Dow Jones Industrial (DJ30) had surpassed this level yet.

According to experts, the reason for the rapid recovery of Vietnam's stock market is that the new cash flow, also known as money of investors "F0", continues to pour into the market. In addition, deposit interest rates have decreased by a total of 1-2.5 percentage points in most commercial banks from the beginning of the year because of weak credit demand (growth only reached 4.81%until August 16th, while the target of 2020 is 14%) that is also a factor affecting the market. Therefore, the stock market is becoming more attractive than other investment channels like gold or real estate because of low capital requirements and high liquidity. The most recent updated figures show that the number of newly opened brokerage accounts increased by 4.8%in August compared to the lastmonth (to 28,300) and is the highest level since 2019 (15,000 - 20,000 accounts per month).In addition, some signals showlending depositoutstanding has begun to increase sharply since the end of July 2020.

According to Nguyen Ngoc Lan, Deputy General Director of Agribank Securities Company, with low interest rates and few investment opportunities in the economy, cash flow would "run around" a number of investment channels, of which, securities still had many advantages for capital attraction because of fast capital turnover.

VN-Index is forecasted to continue to recover

According to securities expert Nguyen HuuBinh, the VN-Index has the opportunity to reach 960 points (+/- 20 points) in October. However, in the second half of the month, especially when the market approaches the target point, investors should be cautious because many stock markets in the world, especially the US market, are likely to have great volatility when day of the presidential election approaches while the Covid-19 pandemic is still raging.

“Domestically, current prices of many stocks are considered expensive, so it is not easy to find investment opportunities. It is forecast that the cash flow will tend to find stocks that have not increased or have increased slightly. These stocks belong to basic enterprises, these enterprises and industry have not had strong enough supportive information, the price recovered weakly," Binh said.

In addition, the fact the October market every year can be seen as an important transfer month when investors pay attention to the fourth quarter business season, even next year's business plan. This year's performance report is likely not be the same as in previous years, but during the difficult period, some enterprises still take advantage of and maintain growth.

Many investors agreed that deposit, gold and real estate channels are reducing attractiveness, so cash flow can flow more into the stock market. Moreover, the increased capital flow helps enterprises on the stock floor to mobilise capital more easily instead of borrowing from banks. This is a long-term positive factor helping enterprises quickly recover.

A veteran investor revealed the appropriate strategy at this stage is to hold a high proportion of stocks in the portfolio, especially should pay attention to growth stocks like food production, banks, stocks and construction materials. However, risks have signs of slight increase, so short-term investors should refrain from buying new with the VN-Index still below 920 points.