The Flow of Funds: What to Do When Stocks Have Good Earnings but Prices Don’t Rise?

Quarterly business results for Q3 2024 are pouring in, but market movements have not shown commensurate reactions. Last week, the VN-Index fell for the first three consecutive sessions, recovered on Thursday, but faltered in the final session. The index also retreated once again after approaching the 1,300-point mark. The average matched transaction liquidity on the HoSE also did not show any progress and even slightly decreased.

Nevertheless, the strong gain on Thursday helped the VN-Index establish a higher bottom and maintain a narrowing adjustment amplitude, preserving the short-term uptrend since the early August 2024 bottom. According to experts, this is a positive technical development as a trend continuation pattern is forming, promising a breakthrough opportunity. However, liquidity is still a factor that makes experts cautious, and in fact, the market has had several breakthrough opportunities in the past few weeks but has been unsuccessful.

Commenting on the Q3 2024 earnings effect, experts still expect profit information to support the market, and in fact, this is the force that makes the adjustment paces smaller. However, there are also many cases where stocks with good earnings reports do not increase in price. According to experts, investors can act depending on their state and strategy. If it is short-term speculation, the poor stock response may be due to “information already reflected in the price,” and the margin should be reduced, especially if using margin. If it is a long-term investment, the good Q3 results will gradually be reflected in the long-term price trend, especially as Q4 prospects are more positive. Therefore, investors can continue to hold or even buy more when the price retreats.

Nguyễn Hoàng – VnEconomy

The market fluctuated unpredictably last week, partly due to the appearance of the derivatives expiration session. The VN-Index fell for the first three sessions of the week but recovered in the last two sessions and created a higher bottom than the October peak. Some opinions assessed this as a positive technical signal when the index fluctuated with an increasingly narrow adjustment and continuously hugged the 1,300-point region, consolidating the breakthrough opportunity. What are your thoughts on this?

Nguyễn Việt Quang – Director of Business Center 3, Yuanta Hanoi

The index’s adjustment amplitude is getting narrower and narrower, and it is currently hovering around the 1,300-point mark. Many people believe this to be a positive development, and the index is following a pattern of narrowing trading amplitude. However, the excessive narrowing, coupled with the VN-Index chart resembling a beautiful painting, gives me a different perspective. I believe that when you climb to the “peak” of a mountain, you will see the most breathtaking scenery. Additionally, on Thursday, the index broke through the trend channel formed by the bottoms of August 5, September 17, and October 7, along with the negative developments on Friday. Therefore, I remain cautious rather than excited, and I have implemented risk management measures by significantly reducing my position. When the market convincingly surpasses 1,300, I will consider reinvesting, and it won’t be too late.

Nghiêm Sỹ Tiến – Investment Strategy Specialist, KBSV Securities

Technically, continuously creating higher bottoms and moving within a narrowing amplitude are signs similar to the “Ascending Triangle” pattern. This may indicate a continuation of the uptrend, following the sideways accumulation sequences with decreasing liquidity and forming higher support points.

After numerous failed tests, the resistance zone around 1,300 points is exerting significant pressure on the market’s psychology, causing profit-taking and position-reducing selling to dominate when the index reapproaches this level. Nonetheless, with the short-term uptrend being preserved, the probability still favors the scenario in which the VN-Index will successfully conquer the aforementioned resistance threshold.

Lê Đức Khánh – Analysis Director, VPS Securities

The accumulation region revolving around the old peak is narrowing, and the trading amplitude is shortening. The sideways accumulation pattern is meticulous and preparing for a breakthrough opportunity to reach a new peak. I believe this development will likely occur next week or, at the latest, the final week of October.

Nguyễn Thị Mỹ Liên – Analysis Department Manager, Phu Hung Securities Company

Technically, the VN-Index’s fluctuations are forming a VCP pattern with a narrowing amplitude. Typically, this is a positive pattern that provides an opportunity to initiate a new uptrend if it breaks through the 1,300-point level. However, it is important to note that any pattern has a certain success probability. In the past 1-2 weeks, I have observed that the market has had several opportunities for buying forces to participate and contribute to the pattern’s completion. Still, it hasn’t happened yet. If the buying force does not show more positive changes this week, I think caution is necessary.

Lê Minh Nguyên – Senior Director of Individual Customers, Rong Viet Securities

In the last trading session, the VN-Index closed at the support level of 1,285.46 points and is likely to continue testing this support region. If the market maintains this support level in the new trading week, it will consolidate the opportunity to approach the 1,300-point region. However, with the current low liquidity, the market is more likely to fluctuate within the 1,240-1,300-point range for accumulation rather than breaking through the 1,300-point level. In this information trough phase, we cannot expect the market to make a strong breakthrough but should await gradual accumulation as we approach the end of the year and anticipate more supportive information.

Nguyễn Hoàng – VnEconomy

Last week, you anticipated that capital flows would become more positive this week as earnings reports emerged. However, we have yet to witness a distinct change in liquidity, and transactions have even slightly decreased. Meanwhile, statistics show that individual investors have been net buyers continuously with a substantial volume. It seems that investors remain cautious, or is the market’s capital truly weakening? How do you assess the demand for margin at this point?

Nguyễn Thị Mỹ Liên – Analysis Department Manager, Phu Hung Securities Company

Positive earnings results will be reflected in stock prices, and capital will flow into these stocks if their valuations remain attractive. However, it cannot improve the overall market liquidity. In reality, during the past week, domestic individual investors’ net buying was due to net selling by foreign investors. It appears that the buying force is still relatively weak, and investors’ psychology remains cautious as the VN-Index struggles to surpass the 1,300 threshold. Therefore, investors should maintain a moderate position and refrain from using margin in this phase.

Nghiêm Sỹ Tiến – Investment Strategy Specialist, KBSV Securities

Quite a few enterprises have announced their Q3 2024 results so far, but overall, profits are showing signs of stagnation and even decline in some sectors. The subpar performance may have been reflected in the cautious trading witnessed in recent sessions. These data may not be negative enough to trigger a sell-off, but they also struggle to generate a substantial buying momentum. Therefore, at least in the first half of Q4 2024, the demand for margin will unlikely experience a significant surge.

Nguyễn Việt Quang – Director of Business Center 3, Yuanta Hanoi

In my observation, many investors maintain a certain stockholding ratio and closely monitor the market’s movements to decide whether to increase or decrease their positions. This also contributes to the lackluster market liquidity. In the current phase, I assess the demand for margin to be moderate, and the existing sources are still abundant.

Lê Minh Nguyên – Senior Director of Individual Customers, Rong Viet Securities

The earnings reports that have emerged contain some positive aspects, but the market seems to be awaiting more favorable news to attract capital inflows and spur a breakthrough. Currently, individual investors dominate the market, while large capital remains on the sidelines, observing and awaiting clearer opportunities. The VN-Index is fluctuating within a narrowing amplitude, and liquidity has not increased despite the supportive Q3 earnings reports. This indicates that the demand for margin is also not high at the moment, and short-term trading becomes more challenging.

Lê Đức Khánh – Analysis Director, VPS Securities

In this phase, investors may still need and use margin, but it is crucial to reiterate the importance of controlling the number of stocks in their portfolios and carefully selecting stocks. If the opportunity is uncertain, the stock price is favorable, the liquidity is high, and the trading style is rapid, using margin can be effective. However, value investors are likely to use it less frequently.

Nguyễn Hoàng – VnEconomy

Foreign capital suddenly turned to strong net selling last week, ending the previous four weeks of balanced trading, with some weeks even recording substantial net buying. Has the exchange rate effect faded, or does foreign capital also intend to take profits around the 1,300-point peak?

Nghiêm Sỹ Tiến – Investment Strategy Specialist, KBSV Securities

The return of net selling by foreign capital may be attributed to the recent sharp rise in exchange rates. Several factors are believed to be the cause, including the increase in the DXY Index, the surge in USD foreign currency demand, and the outflow of large amounts of USD from the system. Generally, foreign capital in the stock market is quite sensitive to exchange rate fluctuations, and this issue should also be monitored as the net selling of foreign capital can influence the overall market psychology in the context of a lack of supportive information.

Lê Minh Nguyên – Senior Director of Individual Customers, Rong Viet Securities

In my opinion, it is understandable that foreign capital has returned to net selling as the VN-Index approaches the 1,300-point mark, given the low liquidity and the large capital on the sidelines observing and awaiting clearer opportunities.

Nguyễn Thị Mỹ Liên – Analysis Department Manager, Phu Hung Securities Company

The strong net selling by foreign investors last week was significantly influenced by the rebound in exchange rates and the escalating geopolitical tensions. The USD Index has been continuously increasing since the end of September and has reached its highest level in over two months. Additionally, the SBV was forced to intervene to ease the pressure on the exchange rate by issuing bills worth up to VND 12,300 billion after a nearly two-month hiatus.

Foreign capital continues to flow between markets, and I believe foreign investors are becoming more cautious as October presents various variables, such as the US presidential election, the Fed’s interest rate cut extent in 2024, tensions in the Middle East and the Korean Peninsula, and the attractiveness of risky assets like stocks has diminished due to their lower valuations.

Nguyễn Việt Quang – Director of Business Center 3, Yuanta Hanoi

After a long period of trading in Vietnam, foreign capital has adjusted its strategies to better adapt to our market. When encountering strong resistance levels or profitable positions, it is understandable that they would choose to take profits. Regarding the Fed’s interest rate cut, foreign capital also needs time to flow between markets.

Lê Đức Khánh – Analysis Director, VPS Securities

The area around the old peak or the rapid rise in bank stock prices, for instance, could increase the pressure to sell or take profits. The reduction in the proportion of stocks held by foreign investors is also explainable and appropriate in this context.

Nguyễn Hoàng – VnEconomy

Many stocks have released earnings reports, but their prices have not progressed significantly, and some have even declined last week. How should investors act in this situation?

Nguyễn Việt Quang – Director of Business Center 3, Yuanta Hanoi

It is common for stock prices to remain stagnant or deviate from earnings reports. This can be explained by the phrase “information has been reflected in the price.” Regarding investor actions, I believe it depends on the stock’s movements and earnings results. Here are some examples: if a stock surges to a strong resistance level before releasing good earnings, and the price fails to increase