Liquidity is still a big question for the stock market

The Vietnamese stock market experienced a week of strong correction when pessimistic sentiment overwhelmed, spreading selling pressure across most stock groups. VN-Index could not maintain recovery and repeatedly failed in its efforts to reconquer the psychological threshold of 1,700 points.

In addition, strong net selling activities by foreign investors continued to create significant pressure on trading sentiment. At the end of the week, VN-Index closed at 1,686.11 points, down 5.67% compared to the previous week.

Regarding the level of influence, the pair VHM and VIC put the greatest pressure in the last session of the week when taking away 3.2 points of VN-Index, followed by TCX, MWG and TCB also causing the index to lose a total of 3.08 points. Meanwhile, BSR, STB and VNM went against the trend with positive demand and contributed 1.82 points to the general index.

The market reversal and going against the forecast of the majority of securities companies put investors with negative capital before a not simple choice: should they take advantage of selling to reduce losses or "bottom-fish" the average cost of goods sold on the existing portfolio, or even "surf" new stocks?

After a period of strong fluctuations, the market is currently around the 10-year lowest valuation zone, with P/E slipping (calculated in the last 12 months) about 10 times. The market has seen a series of leading stocks fall to the lowest level in many years for investors to consider.

Typically, in the banking group, there are VCB, CTG, EIB, TPB... falling to the lowest level in a year; while securities have SSI, VIX, VCI. In the real estate group, KDH returned to the price range at the end of 2022, while NLG was at the beginning of 2023. Some isolated cases such as PNJ and DGC fell to the lowest level since 2021, which is more than 5 years, due to legal risks and corporate governance.

However, low valuation is not enough for cash flow to return. Liquidity and interest rate levels do not have many grounds to improve significantly soon. To confirm that the stock market will enter a recovery cycle after a deep discount wave, liquidity is a signal that the market is observing carefully. Real order matching liquidity on the exchange must escape the state of being lost and record a clear recovery in volume. This recovery must be accompanied by cash flow actually participating in the stock buying and selling trading cycle.

The viewpoint of many securities companies is still to choose the option of standing aside and observing. The majority believe that investors should not act immediately, but wait for market reaction when falling to the 1,640 point zone or when the amount of shares bought in the session increased on July 23rd to their accounts. For those who are holding shares but are not under pressure to borrow margins, selling off at this time is not necessary.

The short-term downtrend still prevails and VN-Index may continue to test near support zones. Short-term investors should reduce their proportion in recovery phases, avoid using leverage and only buy when the market shows stable signals with improved cash flow.

With a medium and long-term vision, investors can explore parts of the support areas, prioritizing businesses with good foundations. Four criteria to choose stocks worth accumulating, instead of just looking at market prices that have fallen to the lowest level in many years.

First, healthy financial foundation and stable profits through fluctuating cycles. Second, industry leading position and market share are difficult to replace. Third, regular dividend policy, reflecting real cash flow and commitments to shareholders. Finally, the quality and transparency of the leadership are the most important but most easily overlooked criteria.