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 floor also did not show any progress and even slightly decreased.

However, 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 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 not succeeded.

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 financial 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 financial results will gradually be reflected in the long-term price trend, especially as the Q4 outlook is 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 in 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 is hugging the 1,300-point region. Many people think this is a positive action, and the index is following the pattern of narrowing the trading amplitude. However, the excessive narrowing, along with the VN-Index chart looking like a beautiful painting, gives me a different perspective. I think that when you climb to the “peak” of the mountain, you will see the most beautiful painting. In addition, on Thursday, the index had a moment when it broke the trend channel formed by the bottom on August 5, September 17, and October 7, along with the negative developments on Friday. Therefore, from my point of view, I am still more cautious than excited, and I have implemented risk management by reducing the margin ratio significantly. When the market convincingly surpasses 1,300, I will participate in disbursement again, 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 the continuation of the uptrend, after the chains of sideways accumulation with decreasing liquidity and forming higher support points.

After many failed tests, the resistance zone around 1,300 points is putting heavy pressure on the market’s psychology, causing profit-taking and reducing the ratio to be the dominant actions when the index approaches again. However, with the short-term uptrend being preserved, the probability is still tilted towards the scenario that the VN-Index will successfully conquer the resistance threshold above.

Lê Đức Khánh – Analysis Director, VPS Securities

The accumulation region is revolving around the old peak, and the movement is getting narrower and shorter. The sideways accumulation is tight, and a breakthrough opportunity for a new peak is being prepared. I think this development will likely happen next week or, at the latest, the last week of October.

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

Technically, the VN-Index’s fluctuations are forming a VCP pattern that narrows the amplitude, usually a positive pattern, providing the opportunity to open a new uptrend if it breaks through 1,300 points. However, it is necessary to pay attention to the fact that each pattern has a certain success rate. In the past 1-2 weeks, I noticed that the market had a few opportunities for the buying force to participate in completing the pattern, but it has not happened yet. If the buying force does not show a more positive change this week, I think we need to be cautious here.

Lê Minh Nguyên – Senior Director of Individual Customers, Dragon Vietnam 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 sideway in the 1,240-1,300-point region to accumulate rather than break through the 1,300-point region. In this information trough period, we cannot expect the market to break through strongly but wait for the accumulation to gradually wait for more supportive information in the period towards the end of the year.

Nguyễn Hoàng – VnEconomy

Last week, you expected the money flow to be more positive this week when the business results appeared. However, the liquidity has not changed much, even slightly decreased. Meanwhile, statistics show that individual investors have been net buying continuously with a large scale. It seems that investors are still very cautious, or the money flow in the market is really weak? How do you assess the demand for margin at this time?

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

Positive business results will be reflected in stock prices, and money will flow into those stocks if the valuation is still attractive. However, it cannot improve the overall market liquidity. In fact, in the past week, domestic individual investors have been net buying continuously due to the net withdrawal orders of foreign investors. It can be seen that the buying force is still quite weak, and investors’ psychology is still very cautious when the VN-Index cannot exceed the 1,300 threshold. Therefore, investors should maintain a moderate ratio and limit the use of margin in this period.

Nghiêm Sỹ Tiến – Investment Strategy Specialist, KBSV Securities

Quite a few enterprises have announced Q3 2024 business results so far, but looking at the general picture, profits are showing signs of leveling off and even decreasing in some sectors. The below-expected operating results have probably been reflected in the liquidity picture in recent sessions, with more cautious transactions in the market. These data may not be negative enough to drive a sell-off, but it is also difficult to create a large buying force. Therefore, at least in the first half of Q4 2024, the demand for margin will hardly surge.

Nguyễn Việt Quang – Director of Business Center 3 Yuanta Hanoi

In my opinion, many investors still hold a certain ratio of stocks and are closely monitoring the market’s movements to decide whether to increase or decrease their holding ratio. This also partly makes the market liquidity less vibrant. In the current period, I assess the demand for margin at a moderate level, and the source is still abundant.

Lê Minh Nguyên – Senior Director of Individual Customers, Dragon Vietnam Securities

The business results that have appeared are still positive, but it seems that the market is waiting for better information to attract money flow and break through. Currently, it can be seen that individual investors are mainly trading, while large money flow is still standing outside, observing and waiting for clear opportunities to participate in the market. The VN-Index is sideways with a narrowing amplitude, and liquidity does not increase when there is Q3 business results support, indicating that the demand for margin at this time is not high, and short-term trading is even more difficult.

Lê Đức Khánh – Analysis Director, VPS Securities

In this period, investors may still need and use margin, but it is necessary to remind about controlling the number of stocks held and paying attention to stock selection. If the opportunity is uncertain, the price movement is favorable, the stock liquidity is high, and the trading style is fast, using margin will be effective. However, value investors will probably use it less.

Nguyễn Hoàng – VnEconomy

Foreigners unexpectedly resumed strong net selling last week, ending the previous four weeks of balanced trading, and even net buying quite well in some weeks. Does the exchange rate effect seem to be fading, or do foreigners also want to take profits around the 1,300-point peak?

Nghiêm Sỹ Tiến – Investment Strategy Specialist, KBSV Securities

Foreigners resuming net selling may be due to the sharp rise in exchange rates recently. There are a few factors believed to be the cause, such as the increase in the DXY Index, the surge in USD currency demand, the large outflow of USD from the system, etc. In general, foreign capital in the stock market is quite sensitive to exchange rate fluctuations, and the above issues should also be observed at this time when the net selling of foreign capital can affect the general trading psychology of the market, in the context of few supportive information.

Lê Minh Nguyên – Senior Director of Individual Customers, Dragon Vietnam Securities

In my opinion, with the VN-Index approaching the 1,300-point mark in the context of low liquidity and large money flow still standing outside, it is not surprising that foreigners resumed strong net selling.

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

The strong net selling of foreigners last week was significantly affected by the rebound in exchange rates, along with the geopolitical situation becoming increasingly tense. The USD Index has increased continuously since the end of September to the present and reached the highest level in more than two months. Also, last week, the SBV had to intervene to reduce exchange rate pressure by issuing bills with a scale of up to VND 12,300 billion after nearly two months of suspension.

Foreign capital is still circulating among markets, and I think foreign investors are taking a more cautious approach as there are many variables in October, such as the US presidential election, the Fed’s interest rate cut in 2024, tensions in the Middle East, on the Korean peninsula, etc. In addition, the valuation of risky assets such as stocks has decreased their attractiveness.

Nguyễn Việt Quang – Director of Business Center 3 Yuanta Hanoi

After a long time of trading in Vietnam, foreign capital has also changed its strategy to adapt better to our market. When encountering strong resistance regions or sharp stock price increases, such as bank stocks, it is understandable that they take profits. It also takes time for the FED to reduce interest rates for foreign capital to flow back.

Lê Đức Khánh – Analysis Director, VPS Securities

The peak region or the rapid stock price increase, such as bank stocks, can cause selling pressure or profit-taking to increase. Reducing the ratio of stocks held by foreign investors is also something that can be explained and is appropriate in this situation.

Nguyễn Hoàng – VnEconomy

Quite a few stocks have released financial reports, but their prices have not progressed significantly, even falling last week. What should investors do in this situation?

Nguyễn Việt Quang – Director of Business Center 3 Yuanta Hanoi

It is common for stock prices to remain unchanged or not follow the financial report’s movement after the release of the business results. This can be explained by the phrase: “the information has been reflected in the price.” Regarding investors’ actions, in my opinion, it depends on the stock’s movement and financial results. I have a few examples: if a stock surges to a strong resistance region before releasing good financial results, but the price does not increase, consider taking profits; if a stock falls sharply to strong support, releases bad financial results, but the stock does not fall