Investors need to stay calm, waiting for opportunities

Within only three trading sessions after the lunar New Year, Vietnam’s stock market has lost nearly 70 points or 7 percent and market capitalization evaporated nearly VND300 trillion (US$13 billion) as investors dumped shares heavily due to concerns over the novel coronavirus outbreak.

Investors at a securities company. (Photo: SGGP)

Investors at a securities company. (Photo: SGGP)

However, many experts said that the market sentiment will recover rapidly after the pandemic is controlled and the global market will rebound, making up for previous losses.

Market overreacts

In the first week of the new year in the lunar calendar, Vietnam’s benchmark VN-Index sometime retreated to near 890 points, the lowest level in a year, as the pandemic caused by the new coronavirus prompted investors to sell shares heavily.

Mr. Tran Van Dung, Chairman of the State Securities Commission said that the stock market always the place that is sensitive and reacts strongly to socio-economic developments. However, Vietnam’s stock market dropped sharply after the lunar New Year as investors overreacted after the Chinese stock market plummeted heavily. The history showed that stock markets merely changed immediately for a short time when there were upheavals caused by natural disasters or diseases. Earlier, stock markets also fluctuated immediately when the SARS and H5N1 pandemics happened but recovered as soon as there was a country announcing that it controlled the disease. The time the epidemic hits its peak is the time when stock indicators recover. The market is expected to happen similarly. Therefore, investors should have a multi-dimensional perspective and be calmer with market developments.

The representative of the VNDirect Securities Company said that the outbreak of the novel coronavirus is merely a black swan event to the stock market instead of a factor that triggers a global recession. In the past, the economy and stock market suffered short-term negative impacts caused by global pandemics. However, both the market and most industries that were not affected recovered quickly. This merely causes strong impacts in the short term but it is difficult to change a whole economic cycle.

Many experts also said that amid the context that the global economy experiences several difficulties at it is the end of a growth cycle, along with impacts of the trade war between the US and China, market sentiment is more vulnerable to a global-scale pandemic.

The value chain or the global demand is hard to reverse and global production and consumption will get better when this epidemic is controlled. The stock market might continue to maintain bearish sentiment until there are obvious steps in the progress of disease prevention and control. Assessing the impacts of the nCoV pandemic on the economy as well as the stock market, MBS Securities Company said that the global financial markets have reacted relatively strongly to the outbreak of the nCoV pandemic but these developments have not been to the point of panic. The world’s stock markets always recover well after each pandemic.

Opportunities for long-term investors

Strong declines in Vietnam’s stock market after the lunar New Year also made up for reduction during the days the market closed for the long holidays, helping the market to catch up with developments of the global stock market. Although losing momentum in the global stock market has weakened, the risk in the short term is still at a high level. Therefore, many securities companies recommended that investors should reduce the proportion of shares to protect their investments, especially stocks of industries that are affected heavily by the pandemic, including tourism and aviation. However, from another perspective, the MBS Securities Company said that market slumps might be opportunities for long-term investors to buy stocks that have already dropped drastically.

While bearish sentiment covered the market, pharmaceutical stocks got the spotlight when climbing massively for three trading sessions when the stock market was in the center of the nCoV pandemic with some stocks adding up from 16 percent to more than 42 percent. Particularly, DHG advanced 16.6 percent; DVN soared 41.2 percent; AMV mounted 17 percent; DHT enhanced 22.5 percent. According to the analyses of many securities experts, not every pharmaceutical company got good business results.

Reports by securities companies showed that the profit of many pharmaceutical companies moved flat or dropped but their stock prices still made breakthroughs. This showed that the consensual increase of pharmaceutical stocks mainly comes from the expectation that this will be the industry that benefits from the spread of the pandemic. Nevertheless, not every pharmaceutical company receives benefits from the pandemic because there are significant differences in the types of business products, the proportion of contribution in the structure of revenue and profit, quality standards of the factory, and distribution channel of each company.

Besides the pharmaceutical industry, in the latest trading sessions on February 5 and 6, banking stocks also made breakthroughs and helped the market to rebound after plunging in three previous trading sessions. Some securities experts said that banking stocks increased sharply as they had nose-dived in a few previous trading sessions and according to reports by securities companies, the banking industry is less affected by this pandemic.

This year, forecasts showed that this group still has many positive factors thanks to internal changes inside banks, as well as its rare position in the economy. However, the impacts of the pandemic on enterprises in the economy are great and will possibly affect the activities of banks. Therefore, during this sensitive period, investors need to cautiously observe, cut stock holding proportion and limit disbursement until the market gives new signals.

By Nhung Nguyen – Translated by Thuy Doan

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