Behind the excitement of stock market

The number of individual investors opening securities accounts hit a record in the year of Covid

Stocks surpass historical peaks

At the end of the session on January 13, the VN-Index closed at 1,186.05 points, up 82 points compared to the last session of 2020, equivalent to an increase of more than 7.4%. All organisations said the market is heading to the historic peak set in 2018 (1,204.33 points).

In terms of liquidity, from the beginning of 2021 up to now, the HoSE has had more than VND 122 million matched, equivalent to an average of more than VND 15,000 billion per session, much higher than the average of VND 11,000 billion in December last year.

The strong cash flow into the market pushed the market price of stocks up. According to data analysis firm FiinGroup, since the beginning of January 2021, there have been 82 stocks on the HoSE (30% of total market capitalisation) with value exceeding the historical peak since the listing until now. Banking was the lead wave with eight representative stocks (accounting for 12% of HoSE's market cap), led by shares of VCB and CTG. Meanwhile, Vinhomes (VHM) led the real estate group with the peak price of VND 103.4 thousand/share on 12/1/2021, up 34% over the past three months thanks to high profit prospect in quarter 4/2020 and prices have accumulated for quite a long time (from mid-May 2020 to the end of November 2020).

Next is basic resources and information technology with the representatives of two leading stocks including HPG and FPT. These are two groups of industries expected to maintain growth in 2021 thanks to positive signals from the real estate market and the infrastructure construction sector (for the basic resource industry) or benefit from digital transformation (for information technology).

In particular, HPG was continuously in the top position in liquidity on HoSE with trading volume of tens of million units per session. HPG's market price also climbed high, now reaching VND 44,700/share, up 26% compared to the end of 2020 and 2.7 times higher than the bottom at the end of March 2020.

Regarding the construction and materials industries, 11 stocks have surpassed historic peaks, including TDC, THG, CKG and TCD.

The risks are growing

Commenting on the excitement in the stock market, Nguyen Xuan Thanh, a senior economist and member of economic advisory group of the Prime Minister's, said this came from the belief that, in this crisis, no matter how tough the pandemic is, the financial system stands firm and the policy is supportive.

“With that belief, we concentrated all resources to keep the economy operating, so we continued to pump money, continued to provide fiscal packages, but temporarily forgot the consequences and accepted that debt would increase and accompanied by financial stress," Thanh said.

Quach Manh Hao, an expert on policy and economics from Vietnam - UK, the University of Lincoln - UK acknowledged the current easing policies did not really cover the economy but only help large enterprises, small businesses the poor people still face difficulties due to the loss of markets and job losses. The growth of the stock market did not really reflect the prosperity of the economy and this posed a risk of bad debt in the coming years. Hao said fiscal policy - which was a catalyst of the economy in 2020, may be more cautious in 2021 because low interest rates would stimulate risk speculation outside production, causing an increase of asset bubbles.

Prof. Can Van Luc, Chief Economist of BIDV, said management authorities should pay attention to cash flow that was pouring into stocks in the context of falling interest rates, the number of F0 accounts newly opened by investors record high result.

“The problem set for Vietnam was how to properly regulate interest rates. Being too low was not necessarily good, but it needed to ensure harmony for all parties, both depositors, borrowers and macro management issues. Otherwise, it would lead to consequences of asset bubble,” Luc stated.