The Federal Reserve (FED) has also stopped raising interest rates after its 14 June meeting and investors are expecting a breakthrough in the market that has shown a depressing slump since December last year.
Market sensitive
After poor business results in the first quarter of 2023, investors expect an improvement. However, compared to the previous month, the situation has improved much more. For instance, in the first five months of 2023 the total export value of Vietnam reached USD 135.22 bln, down by 12.3 percent and corresponding to a decrease of USD 18.88 bln over the same period in 2022.
However, in this general decline there have been positive changes according to the statistics gathered by the General Department of Customs. Export turnover in the second period of May 2023 reached USD 16.43 bln, up 43.4 percent compared to the first period of May 2023 which had an increase of USD 4.98 bln. Textile and garment exports recorded an increase of USD 547 mln; and fruit and vegetable products in the second period of May reached USD 422 mln, 1.8 times higher than in the first period of May. In addition, other indicators such as industrial production, retail sales, and consumption in May were also better than in April.
As for the stock market there are signs of a recovery with the situation expected to get better. However, no one knows for sure how long the improvement will last, but if it is certain that the negative factors of both macro and enterprises have bottomed the stock market will show the results.
Some businesses in their monthly profit reports are also showing signs of improvement. If compared with the same period, the profit has decreased, but compared to the previous months, the profit has begun to increase gradually. The key factor in stock price movement is cash flow, but there is no denying that smart cash flow will go ahead and look for change, rather than compare numbers at two disproportionate periods of business conditions.
Quite a few businesses in the last general meeting of shareholders gave good expectations and have helped the stock price increase. The market is so sensitive that businesses with fast loss reduction or very small profits after losing months or quarters are also highly appreciated.
Fair pricing
In the last two months, the stock market witnessed a strong increase in the prices of small and medium-sized stocks, mainly because this expectation was increasing in the group of speculators. But the blur of this wave is difficult to clearly distinguish whether the impact on stock prices is due to the above improvements or purely because of supply and demand, when there is a fairly large amount of new money flowing in to make the marked difference between supply and demand. Most of the stocks with the strongest increase in price over the past time were small liquidity codes. Stocks are also commodities with reciprocal buyers and sellers. When the demand to buy is higher than the demand to sell then the price will increase.
Any bull run, even if it is driven by speculative money, must still be based on some fundamental expectations. It is not difficult to find on forums and groups of investors with analytical information that predict that Company A's profit will increase in the second quarter, and Company B will exit with losses. When stock prices rise well, the common sentiment is that investors will look for a reason to do a fulcrum. When no reason is found, many times investors will convince themselves of the reason given and deceive themselves that others are knowing something that they do not know and participate in the buying race, contributing to pushing prices higher and spreading this sentiment more widely.
Such a cycle of reasoning leads to a moment called verification. This is when the official figures are released. Like a card game, when the cards are all turned over, expectations are gone, but reality must be faced. So, there is a lot of stock plummeting right before the financial report comes out, whether it is really good or just a fake assumption. The market will enter a period of revaluing a stock based on official numbers, or simply speculative cash flow that has been withdrawn from that stock after the rally has fully reflected on the information.
One common consequence of such psychological cycles is the movement of cash flow from speculative stocks to fundamental stocks. Large enterprises, a lot of circulating shares, and high stock prices will be very expensive if they want to speculate. However, the business results of this group in difficult economic times are more reliable because of better resources. For the market trend, blue chip price increase is one of the deciding factors. The cash flow movement to revalue stocks in this group is the first sign.
