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

The Q3 2024 business results 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 order 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 fluctuation range, 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 position 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 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 derivatives expiry 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 range and continuously hovered around the 1,300-point mark, consolidating the breakthrough opportunity. What are your thoughts on this?

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

The index’s adjustment range 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 volatility. However, the excessive narrowing, along 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 beautiful 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 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 investing again; it won’t be too late then.

Nghiêm Sỹ Tiến – Investment Strategy Analyst, KBSV Securities Company

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

After several failed tests, the resistance zone around 1,300 points is putting immense pressure on the market’s psychology, causing profit-taking and position reduction to dominate when the index approaches this level again. Nonetheless, with the short-term uptrend being preserved, the probability still leans toward the scenario of the VN-Index successfully conquering the resistance threshold.

Lê Đức Khánh – Analysis Director, VPS Securities Company

The accumulation zone around the old peak is narrowing, and the trading range is getting shorter. The sideways accumulation trend is well-established, and a breakthrough opportunity for a new peak is being prepared. I believe this development will likely occur next week or, at the latest, in the final 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 with decreasing volatility. 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 essential to consider that all patterns have a certain success rate. In the past 1-2 weeks, I have noticed that the market has had a few chances for buying forces to participate and help complete the pattern, but this has not happened yet. If the buying force does not show a positive change this week, I think caution is necessary.

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

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 level. If the market maintains this support level in the new trading week, it will consolidate the opportunity to approach the 1,300-point mark. 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 a strong market breakthrough but should wait for gradual accumulation as we approach the end of the year and more supportive information emerges.

Nguyễn Hoàng – VnEconomy

Last week, you expected the capital flow to be more positive this week as the business results were released. However, we have not seen a clear change in liquidity, and trading has even decreased slightly. Meanwhile, statistics show that individual investors have been net buying continuously with a large scale. It seems that investors are still very cautious, or is the market’s money flow truly weakening? How do you assess the demand for margin loans at this point?

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

Positive business results will be reflected in stock prices, and capital will flow into those stocks if their valuations remain attractive. However, it cannot improve the overall market liquidity. In reality, domestic individual investors’ net buying last week was due to net withdrawal orders from foreign investors. It appears that the buying force is still quite weak, and investors are very cautious as the VN-Index struggles to surpass the 1,300 threshold. Therefore, investors should maintain a moderate position and refrain from using margin loans during this period.

Nghiêm Sỹ Tiến – Investment Strategy Analyst, KBSV Securities Company

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 market’s cautious trading in recent sessions. These figures may not be negative enough to trigger a sell-off, but they also struggle to create a significant buying momentum. Therefore, at least in the first half of Q4/2024, the demand for margin loans will unlikely surge.

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

In my opinion, many investors still hold a certain proportion of stocks and closely monitor the market’s movements to decide whether to increase or decrease their positions. This also partly contributes to the lackluster market liquidity. In the current phase, I assess the demand for margin loans to be moderate, and the current supply is still abundant.

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

The Q3 results have been positive, but the market seems to be waiting for better news to attract capital inflows and break through. Currently, individual domestic investors dominate the market, while large capital remains on the sidelines, observing and waiting for clear opportunities to participate. The VN-Index is fluctuating within a narrow range, and liquidity has not increased with the support of Q3 earnings reports. This indicates that the demand for margin loans is not high at the moment, and short-term trading is becoming more challenging.

Lê Đức Khánh – Analysis Director, VPS Securities Company

In this phase, investors may still need and use margin loans, but it is crucial to emphasize controlling the number of stocks in their portfolios and carefully selecting stocks. If the opportunity is uncertain, the stock price performance is favorable, the liquidity is high, and the trading style is rapid, using margin loans can be effective. However, value investors are likely to use them 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 is foreign capital also taking profits around the 1,300-point peak?

Nghiêm Sỹ Tiến – Investment Strategy Analyst, KBSV Securities Company

The return to net selling by foreign capital may be due to the recent sharp rise in exchange rates. There are several factors believed to be the cause, such as 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 affect the market’s overall trading psychology, especially in the context of limited supportive information.

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

In my opinion, it is understandable that foreign capital turned to strong net selling as the VN-Index approached the 1,300-point mark, given the low liquidity and the large capital on the sidelines observing and waiting for clear opportunities.

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

The strong net selling by foreign investors last week was significantly impacted 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 brings several variables, such as the US presidential election, the Fed’s interest rate cut scale 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 Securities Company

After a long time of trading in Vietnam, foreign capital has also made strategic adjustments to adapt better to our market. When encountering strong resistance levels or profitable levels, it is understandable that they would take profits. It will take time for the effects of the Fed’s interest rate cuts to be reflected in foreign capital flows.

Lê Đức Khánh – Analysis Director, VPS Securities Company

The area around the old peak or the rapid increase in bank stock prices, for example, could increase selling pressure or profit-taking. 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 their earnings reports, but their prices have not progressed significantly, and some have even decreased last week. How should investors act in this situation?

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

It is common for stock prices to remain unchanged or deviate from earnings reports. This can be explained by the phrase “information already reflected in the price.” Regarding investor actions, I believe it depends on the stock’s performance and earnings results. Here are some examples: if a stock surges to a strong resistance level before releasing good earnings results but fails to increase further, consider taking profits; if a stock plunges to a strong support level and releases poor earnings results but does not fall further, investors can consider buying more or holding the stock, waiting for a rebound to sell…

Nghiêm Sỹ Tiến – Investment Strategy Analyst, KBSV Securities Company

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