Small stocks gain
Contrary to the myth of selling in May, the VN Index unexpectedly grew in May with a total increase of 26 points, equivalent to 2.48 percent. The VN Index rally in May is expected to be ignited by Government efforts to stimulate the economy. The State Bank of Vietnam has also shown a firm determination in loosening the monetary policy, even when there was the third interest rate cut of the year at 25 basis points. In addition, the State Bank of Vietnam also net injected VND 20,453 bln into the market in May to support liquidity flow.
According to statistics, the VN Index gained 2.48 percent in May and was one of the best performing indexes along with Nikkei 225 which was up 7.04 percent and the KOSPI Index which was up 3.02 percent. But what is quite surprising is that the small and medium-cap groups outperformed, contributing the most to the VN Index gain with an increase of 9.35 percent and 4.34 percent. However, the group of large-cap stocks in the VN30 basket only contributed 1.42 percent.
Explaining this phenomenon, analysts at Viet Dragon Securities Company (VDSC) said that the group of small and medium-cap stocks had a positive price increase in the direction of the macroeconomic policy as analyzed above. While the situation in production, business, and consumption is likely to continue to be less positive in the second quarter, it will cause large-cap stocks to record lower price growth.
The market also received a positive boost in terms of liquidity with the average matched value on HoSE reaching VND 10,631 bln per session, up 8.8 percent compared to April. The small and medium-sized group was the focus of cash flow when the liquidity increased by 13.6 percent and 11.2 percent as compared to April. The cash flow continued to be pushed in the first trading sessions of June with many sudden transactions reaching more than VND 18,000 bln on HoSE, equivalent to an increase of 100 percent compared to the average in April.
Foreign investors' net sell
Even while the stock market was active, foreign investors still strongly net sold in May and in the trading sessions in June. According to statistics, foreign investors net sold more than VND 2,800 bln on HoSE in May and about VND 500 bln in the trading sessions in June. The strong net selling by foreign investors in May wiped out the entire accumulated net capital flow since the beginning of the year and is on the list of leading foreign capital withdrawals in Asia, along with Thailand with USD 967 mln and Malaysia with USD 159 mln.
Net withdrawals also took place with ETFs such as Van Eck Vectors Vietnam ETF with a net withdrawal of USD 4.84 mln and Select EM ETF with a net withdrawal of USD 46.85 mln. These are the two main factors contributing to the net withdrawal of foreign ETFs with a net withdrawal of USD 49.24 mln. SSIAM VNFIN LEAD and DCVFMVN30 EFT withdrew USD 1.39 mln and USD 16.19 mln and contributed the most to the net selling of USD 17.42 mln of domestic ETFs.
Similarly, domestic institutional investors extended their net selling pressure in May with VND 4,500 bln and marked their accumulated net selling position from the beginning to VND 6,557 bln.
Individual investors
The fact that foreign investors were net sellers while cash flow was promoted to small and medium-sized stocks shows that this is really the cash flow from individual investors. According to VDSC statistics, individual investors dominated in purchasing power with a net worth of VND 7,598 bln and contributed the most to the sudden increase in market liquidity when accounting for 86 percent of market liquidity in May. With this, the strength of domestic cash flow that has helped the stock market to sublimate in 2021 has once again been seen.
However, whether the cash flow from individual investors will continue to stay in the market is still an unanswered question. According to VDSC, a positive point for the stock market in June is that the cash flow continued to return, and the ceiling of short-term deposit interest rates continuously decreased in the last three months. However, in terms of the spread of cash flow in the large-cap group, it is still quite low, due to concerns that the internal factors of most of these enterprises have not really recovered in the second quarter. Therefore, VDSC does not expect that the market can go much further in terms of scores this month. A bull market is still awaiting, coming from signs that the domestic economy has really absorbed the recent support of monetary and fiscal policies which will result in a more positive outlook.
According to one leader of a securities company, the net selling status of foreign investors in the last few weeks is a worrisome factor. Currently, the cash flow from individual investors is still enough to balance and absorb the entire supply, but the pressure will likely continue to increase in the near future. This is because the market valuation as well as the price of many stocks increased significantly from the bottom seen in November 2022 and the period when foreign investors gathered a record net. The psychology of individual investors is definitely negatively affected by the increase in the net selling of foreign investors. Once the stock price does not increase as expected or even correct, it will create a sell-off wave by individual investors.
