Securities: Domestic investment cash flow ‘pushed’ the market up

5 min read
Vietnam’s stock market is still assessed to maintain its uptrend in 2021.

It seems that investors are “keeping their cool head” when the stock market is still assessed to maintain an uptrend in 2021 with many supporting factors such as macroeconomics, corporate health, power domestic money, the return of foreign capital, or congestion has been overcome.

Surprise with “new peaks”

The Covid-19 epidemic reappeared on the occasion of the Lunar New Year, causing risks in Vietnam’s stock market (stock market) to increase, especially in the context of a high price base at the end of 2020 and early 2021. Along with that, the congestion on the HoSE appeared more and foreign investors continued to be net sellers, making the psychology of investors (investors) on the stock market inevitably worried and concerned.

However, throughout the first few months of this year, Vietnam’s stock market has not “cooled down” with the above risks and kept its upturn momentum thanks to high expectations on the macroeconomic recovery, as well as the strong and persistent domestic cash flow. VN-Index has surpassed historical peak and set a new peak firmly. Not stopping at the increase of 7.9% in the first quarter, VN-Index surpassed its historical peak in the first session of April 2021, reached 1,216.10 points and reached a new peak of 1,268.28 points on 20 /. 4/2021. Thus, compared to December 31, 2020, the VN-Index has increased by 164.41 points (15%). Compared to the same period on 20/4/2020, the VN-Index increased 473.31 points (nearly 60%). This is really a spectacular recovery and increase of Vietnam’s stock market in the context of still many risks.

At the same time, liquidity still showed strength, when the average trading value of the session in the first quarter reached VND 15,684.69 billion / session – the highest ever. Even in recent sessions, the transaction value continues to accelerate with many sessions over VND 20,000 billion appearing. The factor that makes up the liquidity history is mainly from the internal block, despite the congestion of orders has not been definitively handled and the net foreign sales volume is strong (net foreign sales -20,988 billion VND on all 3 floors in the first quarter).

Macro background and many supporting “drugs”

Experts say that the support for the strong growth period of Vietnam’s stock market recently is the combination of many factors. Besides the recovery of the economy and the international stock market, the domestic fundamentals are getting better, reinforcing the confidence and expectation of investors. Along with the recovery of corporate health, the “cheap money” environment has pushed new domestic cash flows into the stock market.

Along with solutions to support the economy of the Government and ministries, branches and stock exchanges in recent years, they have also received direct and necessary support from the Ministry of Finance, the State Securities Commission (SSC) and related units. Accordingly, a series of fees, charges and service prices in the field of securities have been issued in time such as Circular 37/2020/ TT-BTC, Circular 14/2020 / TT-BTC; Circular 70/2020/TT-BTC,… These circulars are still valid and persistent to support securities companies to overcome difficulties.

In addition, according to the representative of the State Securities Commission, this agency has recently implemented many measures to support the market such as cutting administrative procedures, creating conditions for enterprises to buy treasury shares; guide businesses (DN) to organize an online general meeting of shareholders; directs 2 Stock Exchanges (Stock Exchanges) and the Vietnam Securities Depository (VSD) to build scenarios to operate the stock market in all situations. Therefore, along with general support policies, basically the solutions proposed by the Ministry of Finance and the Securities sector have had the effect of supporting and reassuring the psychology of the business community and investors.

Shamelessly – difficult situation but not “giving up”

From the end of December 2020, the trading system at the City Stock Exchange. Ho Chi Minh City (HoSE) repeatedly reported congestion. The main reason is explained by the rapid growth of market liquidity, while the processing capacity of the current trading system is limited. Along with that, Vietnam’s realization of the dual goal of preventing Covid-19 and economic growth has had a good impact on the stock market. At the same time, the sharp decline in interest rates and abundant commercial banks’ liquidity make investment channels in the stock market more attractive. Also, the strong growth in size and liquidity of the stock market exceeded expectations, causing the system to overload the capacity to receive orders.

The block order system partly inhibited the rise of the stock market, at the same time, significantly affected the trading and investment activities of the units and the community of investors. This is a difficult situation for HoSE, regulators and related units.

Therefore, a series of anti-congestion solutions have been immediately researched and applied, so far have been initially effective, gradually limiting the congestion of orders. Accordingly, the solution to raise the trading lot from 10 to 100 shares / lot has been applied from January 4, 2021. Along with hose’s efforts to review and control errors, regulators and stock exchanges have also met with major securities companies to find solutions, optimize orders, to limit the increase in orders.

At the same time, the SSC also instructed HoSE, HNX and VSD to create favorable conditions for enterprises to temporarily transfer transactions from HoSE to HNX. On the other hand, although HoSE still received, approved and approved a new listing, new shares were temporarily traded on HNX. Up to now, 11 enterprises have been transacting in this form and initially received the consent of many businesses, as well as shareholders.

Most recently, HoSE has made technical changes, helping the current trading system to be optimized, significantly reducing order congestion, promoting positive increased liquidity, with many sessions with liquidity up to over VND 20,000 billion per session.

Currently, HoSE is still actively implementing two more radical solutions, that is, together with FPT, to build a new backup system and accelerate the progress of new information technology projects. When these two solutions are officially applied, it is expected that the congestion on HOSE will be completely overcome, opening up new and more sustainable growth opportunities for Vietnam’s stock market.

Source: – Translated by