Vietnam’s stock market welcomes new investors

06:00 | 05/07/2020 Economy

(VEN) - The steep decline of the Vietnamese stock market due to the spread of the Covid-19 pandemic has lured many new investors to the market.

vietnams stock market welcomes new investors

New investors

The Vietnam Securities Depository (VSD) reported a jump in new clients opening financial market trading accounts, with 31,949 and 36,721 accounts registered in March and April, respectively. The number of new accounts opened in April was just behind the record number of 40,651 accounts established in February 2018 when the VN-Index reached its peak of 1,200 points.

From the beginning of March to the end of April, the net buying value of domestic investors reached more than VND8.1 trillion.

The increased opening of new trading accounts in March and April shows that the stock market remained an attractive investment channel for investors in the face of global market fluctuations.

The Vietnamese stock market also witnessed foreign investors’ net buying activities. Specifically, foreign investors net bought fund certificates of VNFIN Lead ETF and VN Diamond ETF, which are operated by the SSI Asset Management Company (SSIAM) and the VietFund Management Company (VFM), respectively. According to experts, the current price-earnings ratio (P/E) of Vietnamese stocks stands at 6-8, the lowest over the past decade, meaning that stock prices are at a low level compared to returns. The current low valuations of stocks will likely bring in more foreign capital.

The cash flow from this increased bottom-fishing demand has contributed to helping the market not only resist the strong net selling trend of foreign investors but also recover strongly.

Strong recovery

The Ho Chi Minh Stock Exchange gained more than 12 percent in May, with all its indices increasing significantly. Some sectors saw sharper growth, such as materials (up 21.67 percent), finance and real estate (up 16.1 percent) and consumer goods (up 14.09 percent). The average daily trading value and volume reached nearly VND5.74 trillion and 314 million shares, an increase of 36.42 percent and 15.89 percent compared to the previous month, respectively.

Cash flow was poured in large-caps, especially in the VN30 basket, as well as mid- and small-caps. In general, in April and May, the VN-Index increased by about 30 percent compared to the end of March. Some stock prices increased by 30 percent, and even 50-70 percent.

The Vietnamese stock market is bouncing back and gaining points. Investors who are professional or can demonstrate an understanding of the risks will continue to pour capital into the stock market. Bui Van Huy, director of the Ho Chi Minh City Securities Corporation’s Market Strategy Department, said the VN-Index is forecast to face correction pressure when approaching the thresholds of 880-900 points.

After penetrating through the thresholds at 880-900 points, the VN-Index may possibly experience a throwback. If successfully retesting this support, the index may be able to expand its recovery toward 920 points.

The Vietnamese stock market is experiencing a strong recovery thanks to Vietnam’s timely and effective handling of the Covid-19 pandemic and the return of normal trade and production activities.

Ngoc Thao