Margin pressure and external factors cause the market to fall deeply
The Vietnamese stock market is undergoing a period of strong correction as VN-Index continuously loses important support levels. According to Mr. Dinh Minh Tri - Director of Personal Customer Analysis, Mirae Asset Securities Joint Stock Company (Vietnam), the index has broken through the 1,700 point mark and is retesting the old bottom around 1,600 points.
From a technical perspective, Mr. Tri said that VN-Index is closely following the lower Bollinger Band, while the MACD indicator continues to expand negative divergence. This reflects that the downward trend still prevails and the market has not shown clear reversal signals.
One of the reasons why the decline became stronger is pressure from outstanding margin debt across the market.
The outstanding margin balance of the whole market is currently estimated at nearly 450,000 billion VND, an increase of about 30,000 billion VND compared to the end of the first quarter and setting a new record. When the market adjusts, margin call pressure creates a chain reaction selling effect, making the decrease stronger than usual," Mr. Tri analyzed.
In addition, geopolitical tensions along with the US Federal Reserve (Fed) maintaining a high interest rate stance continue to weaken the risk appetite in the global financial market, thereby putting pressure on the diễn biến of the domestic stock market.
Cash flow prioritizes businesses with solid financial foundations
In the context of strong market fluctuations, Mr. Dinh Minh Tri believes that cash flow tends to shift to businesses with healthy financial foundations, stable business cash flow and maintaining a regular cash dividend policy.
This is a group of stocks that usually have lower fluctuations than the market thanks to attractive dividend yields, good asset quality and long-term investor structure," Mr. Tri assessed.
However, experts also note that investors need to distinguish between enterprises with sustainable dividend policies and those with high dividend rates that are only temporary due to unusual profits or using leverage to maintain the payment level.
Mr. Tri said that in market adjustment periods, cash flow often prioritizes businesses with solid financial balance sheets, stable cash flow capacity and less dependence on financial leverage.
The group that is considered noteworthy are businesses that own large amounts of cash and maintain high cash dividend rates such as VNM, VEA, SCS, BMP and QNS. These are all businesses with healthy financial foundations, stable business cash flow and attractive dividend yields.
In addition, the group of essential consumer goods, retail, pharmaceuticals and some export enterprises with stable orders are also expected to maintain positive business results thanks to consumption demand being less affected by the economic cycle.
Regarding the banking group, Mr. Tri said that asset quality is showing signs of improvement at some banks with good capital buffers. However, the short-term outlook for this group still depends on the general diễn biến of the market as well as the pace of credit recovery.
Do not try to bottom-fish, prioritize disbursement in installments
Regarding investment strategy, Mr. Dinh Minh Tri recommended that investors prioritize choosing businesses with low leverage ratios, positive net cash, high ROE, stable business cash flow and significantly discounted valuation compared to the historical average.
Conversely, investors should limit businesses with large leverage, poor asset quality or heavily dependent on margin capital.
According to Mirae Asset Vietnam experts, after the recent adjustment, the valuation level of many basic businesses has become more attractive, creating accumulation opportunities for investors with medium and long-term vision. However, when the downward trend has not completely ended, short-term fluctuations may still continue.
The appropriate strategy is to disburse in installments (DCA), prioritizing businesses with solid financial foundations, sustainable profit growth capacity and reasonable valuation, while limiting the use of financial leverage," Mr. Tri recommended.
He also believes that investors should allocate capital in multiple phases instead of disbursing once to reduce the risk of choosing the wrong time, while still maintaining resources to increase the proportion when the recovery trend is confirmed.
In the long term, experts believe that strong adjustments often open up accumulation opportunities for leading businesses with sustainable competitive advantages, healthy financial balance sheets and the ability to create stable cash flow.
Instead of focusing on accurately forecasting the bottom of the market, investors should prioritize choosing quality businesses and managing portfolio proportions that are appropriate to the level of risk acceptance," Mr. Tri emphasized.
