New generation of F0 investors rule stock market

(Saigon Investment) - Since early this year a new generation of F0 investors are pouring cash into the stock market, which has helped the Vietnam Index re-establish the 1,000-point mark. In just one month in November, the Vietnam stock market saw the highest number of new accounts to open in its entire history.
Nam Tan Uyen Industrial Park Joint Stock Company is considered the hottest rising stock on the stock market.
Nam Tan Uyen Industrial Park Joint Stock Company is considered the hottest rising stock on the stock market.

More domestic investors

According to the Vietnam Securities Depository, domestic investors opened 41,203 new accounts in November. The number of new accounts opened in November broke a new record which surpassed the number of new accounts opened in March 2018, which were at 40,651. This is the highest number of new accounts to open in just one month in the history of the Vietnam stock market.

According to statistics, the majority of new accounts opened are those of individual investors. From the beginning of the year until now, the number of newly opened accounts have reached about 330,000, an increase of nearly 88% compared to the same period in 2019. Despite being badly affected by the Covid-19 pandemic, the number of newly opened accounts in the last three months reached 302,000 accounts.

Analysts believe that a spurt in increase of so many new investors on the stock market is because of two main factors, namely, the expectation of fast recovery of the stock market soon after the Covid-19 pandemic is contained, and that the deposit interest rate is expected to decline, which all will help the stock market to become an attractive investment channel.

According to securities experts, the current new investors are much different from the previous generation of investors. These current investors joined the market late, but they are quickly accumulating a vast number of assets. The Vietnamese economy has experienced many years of steady and high growth, and the number of rich people have increased sufficiently and accumulated assets too have increased. These new investors are part of a generation that will inherit the economic development and previous asset accumulation values, so they have great potential in the future.

The appearance of more and more F0 investors, as they are termed, has created a new wave in the stock market in both liquidity and in points. In fact, just after a short correction on 8 December, the market exploded again with many prosperous groups, helping the VN Index break out to close to 1,040 points in the session on 9 December. The positive point was that the market liquidity remained at a high level with matched value of around VND 10,831 bn.

The fact that the VN Index exceeded the psychological threshold of 1,000 points and the cash flow maintained above VND 10,000 bn, created confidence in investors about the possibility that the market will end 2020 with increase showing for five consecutive months. Previously, the longest consecutive increase was the time when the VN Index reached 1,200 points for seven consecutive months in 2018.

Expectation of strong recovery

Although the VN Index increased highly, according to analysts, the share price is still at an attractive rate. According to the Saigon Securities Incorporation (SSI), the Vietnamese market valuation is higher than the previous month but still at an attractive level when looking at expectations. Specifically, the growth in scores in November brought the P/E ratio of 2020 and 2021 of the stock group within the scope of the SSI study to 18.6x and 15.3x on 1 December, higher than levels 17.49x and 14.3x updated on 6 November.

Liquidity maintained at a record high, reinforcing the market view that is reflecting the expectation of a strong recovery in corporate profits from 2021. Compared to other countries in the region, the P/E ratio of Vietnam shows an attractive level when looking at economic growth prospects in 2020 and 2021.

However, in the market, there are still stocks that have recorded a remarkable increase compared to the general level. For example, the Thanh Cong Textile Garment Investment Trading Joint Stock Company (TCM) stock closed the session on 9 December at VND 42,200 per share. This price is 2.4 times higher than at the beginning of 2020 and also the highest price that TCM has achieved since listing.

Similarly, the Hoa Phat Group Joint Stock Company (HPG) stocks reached highest price in history at VND 38,500 per share after trading session on 9 December. At the end of session on 16 November, the Nam Tan Uyen Industrial Park Joint Stock Company (TNC) reached approximately VND 279,000 per share and became the highest priced share on the stock market currently. The most shocking increase was the FLC Mining Investment and Asset Management Joint Stock Company (GAB), which increased more than 18 times, from floor price of VND 12,000 per share in July 2019 to VND 193,000 per share at present.

The issue that is most concerning to investors is when the market corrects and will be in deep decline, like in 2018 after the VN Index peaked at 1,200 points. Normally, when the blue chips show signs of regression, the bulls on the throne are at the end of an upside wave. However, according to MB Securities (MBS), this phenomenon is difficult to repeat in the current period, because the short-term cash flow of the market tends to alternate between stocks.

If at the end of November, the large-cap group attracts the cash flow to increase, while the rest tend to decrease, then in the early sessions of December, the cash flow poured more strongly into the small and medium-capitalization when the large-cap group fluctuated sideways. This comes from the nature of speculative cash flow that is looking for continuous opportunities, so when the large-cap stock group goes sideways, a part of the cash flow flows into small stocks. Thanks to the steady circulation of cash flow, the market is always active and it is forecast that there will be explosive sessions in terms of liquidity from now until the end of the year.

However, disbursement in stocks that have risen hot like TCM, GAB, or NTC are always high risk, because if the information is not as expected, investors can reduce the price of the previous increase, and the phenomenon of stocks touching floor is inevitable. High returns come with high risks, so investors must determine tolerance level, risk appetite, and profit expectations before participating.

In terms of investment strategy, MBS believes that the selection of specific stocks by investors is more important than the market index at this time in the context of high stock level. Cash flow is showing signs of shifting to midcap group or stocks in the basket of ETF Fin Lead and Fin Select. Therefore, besides the banking group that mobilizes the market rhythm, investors should take advantage of corrections to restructure portfolio according to trend in cash flow.

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