The Stock Market Slump: Should Investors Hold or Fold?

Vietnamese stock market experts are cautious in their forecasts and recommendations for investors in the upcoming trading sessions.

Potential Risks of Further Downside:

Bao Viet Securities JSC (BVSC) anticipates the market may witness some recovery sessions on August 2nd: ” The market has plummeted significantly, reaching a relatively low point in terms of supportive information. The index returned to the support area around 1,220 points, where the lower BB band and the lower line of the sideways down channel, formed from mid-June to the present, converge. ”

They further add: ” Positively, the dynamic indicators on the daily and intraday charts have entered the oversold zone. Given this development and the late-session reversal signal on August 1st, we believe the market will experience a rebound in the final trading session of the week. ”

Meanwhile, the Vietnam Investment and Development Bank Securities Company (BSC) notes that bottom-fishing has been relatively strong in the 1,220-1,225 range, but there are still potential risks of a further decline.

Similarly, experts from KB Vietnam Securities Company (KBSV) predict that the VN-Index is likely to continue breaking short-term lows before having a chance to enter a recovery phase.

Vietnam Joint Stock Commercial Bank for Industry and Trade Securities Company (VCBS) also forecasts a potential continuation of the downward trend, with immediate support levels at 1,210 and 1,200.

Commenting on the short-term market performance, Mr. Nguyen The Minh, Director of the Research and Customer Development Division of Yuanta Vietnam Securities Company, stated that the current sharp decline in the stock market does not rule out the possibility of margin calls. However, the pressure on margin calls in 2024 is not expected to be as intense as it was in 2022.

” I forecast that in 2024, the stock market may return to the 1,200 range to rebalance. Currently, the bottom level has not dropped as low as it did in April, but valuations have returned to their lowest levels for the year so far. This indicates that the yield of the stock market is becoming attractive again,” said Mr. Minh.

Additionally, the exchange rate pressure has eased due to expectations of a Fed rate cut in September, which will encourage investors to return to the market in the near term.

What Should Investors Do?

According to Mr. Minh, in the short term, investors need not necessarily sell unless there is significant margin pressure. It is advisable to wait for a balanced range and consider averaging to lower the cost basis. In the long run, the stock market will continue to rise as the current monetary policy supports the market trend. Therefore, investors can consider buying, remaining calm, and analyzing the market to choose the appropriate time to invest.

Mr. Nguyen Viet Quang, Director of the Trading Center of Yuanta Vietnam Securities Company, also recommends that in the short term, the VN-Index will continue to face adjustment pressure, and the actions of the majority of investors will largely depend on their stock and cash positions.

” For investors holding stocks with good business results, adjusting to strong support areas, and having excess cash, they can consider gradual buying when the stock stabilizes its downward trend at the support area to signal a reversal.

For investors with a high proportion of stock holdings, especially those using margin loans and holding stocks that have not yet reached strong support areas, they can sell a portion first and buy back later. If the investor’s portfolio contains stocks with poor second-quarter financial results and no potential for growth in the third quarter, they may consider restructuring into other better-performing stocks,” said Mr. Quang.

Meanwhile, securities companies also advise investors to trade cautiously in the coming sessions.

Saigon-Hanoi Securities Company (SHS) suggests: ” Regarding the VN-Index, investors should patiently wait for the market to break out of the current mid-term accumulation trend before making new decisions. ”

KB Vietnam Securities Company (KBSV) recommends that after reducing their holdings to a low level, investors can consider buying back a portion of their trading positions at lower prices.

Yuanta Vietnam Securities Company (YSVN) emphasizes: ” The short-term trend of the overall market remains bearish. Therefore, we recommend that investors maintain a low proportion of stock holdings and refrain from selling at this stage. ”

VCBS advises: ” We recommend that investors remain calm, restructure their portfolios, eliminate stocks that violate stop-loss thresholds, and only retain those that maintain their trends and comply with trading rules. As the market is currently relatively weak due to a lack of buying power, investors should refrain from new purchases until clearer confirmation of the overall trend is observed. ”

Reasons for the Sharp Decline in the Stock Market:

According to experts, escalating geopolitical tensions could be a factor influencing investor sentiment, coupled with the market entering a quiet period as most companies have already released their financial reports, and the market is relatively weak, leading to a shaky investor sentiment.

Technically, the August 1st adjustment followed the expected pattern: the VN-Index recovered to the resistance channel formed by the November 2023 and April 2024 lows. A closer analysis reveals that this rebound was relatively weak in terms of both price and volume, as the VN-Index failed to surpass the high of the July 23rd bearish candle. The VN-Index is currently in a short-term downward trend, and given these factors, a sharp decline in the session is quite normal.

Mr. Nguyen The Minh identifies four fundamental reasons for the stock market downturn.

Firstly, stocks that surged in the second quarter have already released their financial results, which are now reflected in their share prices. Consequently, investors lack supportive information, which is a typical occurrence during the season of quarterly financial reporting by securities companies.

Secondly, the decline in the stock market can be attributed to cross-margin calls (a situation that arises when a securities company cannot sell stocks that have fallen into a dangerous zone because the stock has hit the floor price) for penny stocks in the second quarter.

The cause is that investors have been buying penny stocks to seek high profits in a short period, leading to a situation where the market fails to break through the 1,300-point mark, and a rapid reversal occurs in penny or Upcom stocks.

” When a stock declines and becomes illiquid, the external lending sources continue to sell off other stocks in the customer’s account,” explained Mr. Minh.

Thirdly, technology stocks globally have started to stagnate and reverse sharply, impacting Vietnamese technology stocks and other sectors, making investors more cautious.

Another factor contributing to the stock decline is the heightened geopolitical tensions in the Middle East over the past few days, which have created a domino effect on investor sentiment.