Individual purchases still key to market growth

Vietnam’s benchmark VN-Index had its first collapse in late March when it lost total 26% in the last three weeks of the month, leading up to a total slump of 33.4% in the first quarter.

The second market collapse came in late July when the VN-Index was dragged down by total 8.35% in two days.

Both collapses came after investors panicked after new coronavirus infection cases were reported in Hanoi and Da Nang.

In both collapses, strong purchasing power from individual investors has been the key to the strong market rebounds.

In January-September, more than 252,000 new trading accounts were opened at securities firms, up 34% on-year, Ta Thanh Binh, State Securities Commission’s Director of the Securities Market Development Department, told a conference on October 21.

In September alone, more than 31,400 new accounts were opened, she said, adding the growth of new accounts has made the local market more active.

Daily average trading volume on the Ho Chi Minh and Hanoi markets in the second and third quarters of the year grew by 40% year on year, the commission official said.

The Vietnamese stock market has performed better than expectations, considered among the fastest-growing markets amid the COVID-19 pandemic, Binh added.

“We have almost reclaimed the loss during the year. The market capitalisation now accounts for 71.3% of the country’s total GDP,” she said.

The benchmark VN-Index ended on October 21 at 939.03 points, a 5.29% gap below its peak of 991.46 points made on January 22 before the collapses.

“Most individual investors want to stick around, especially when other options offer low interest rates,” Le Duc Khanh, director of the investment department at VPS Securities JSC, told the conference.

“Though their accounts are new, they probably had experience and practice with the market,” he said.

As each investor would have his own method of investment, the potential boost provided for the market would vary from one to another.

“If you are value investors, just buy and hold onto the targeted stocks, take a vacation and come back when your investments are profitable without paying attention to the development of the whole market,” Khanh said.

There are now 2.6 million trading accounts in Vietnam and each investor may have many accounts at different securities firms, Bui Hoang Hai, the commission’s director of the Securities Issuance Department, said.

“The number of trading accounts is expected to account for 3% of Vietnam’s total population in 2020 and 5% in 2025,” he said.

“Compared to other markets such as the US and China, the expected figures are still humble,” Hai said.

“We need professional investors, who are strong enough to take the risk. The amended Law on Securities should correct the definition of professional investors and some fields should be explored by professional investors only.”

There should be a restructure for the market to classify the professional from the non-professional so newbies can get access to less risky sections of the securities market, he added.

“I think the market has not become too risky but investors should be really careful and make the right choice,” Khanh said.

Low interest rates offered by banks encourage people to look for alternative investment options, including securities market, he said.

“Vietnam’s stock market has room to grow further. The market’s average price-to earnings per share (P/E) now is 16,” Khanh said.

“Obviously, there are plenty of opportunities at the moment and investors should look at companies with strong financial records to limit the risks and losses.”

Strong individual purchasing power may drive the VN-Index back to 980-1,000 points at the end of the year, he forecast.