Investors are awaiting fresh stock market possibilities

DNHN - In the second quarter of 2022, the number of margin loans and investor deposit balances both declined, but the amount of money waiting to be invested in future chances remained substantial at around VND 70,000 billion.

According to the information compiled by FiinTrade from the financial statements of over thirty securities firms with strengths in margin lending operations (margin lending) for the second quarter of 2022, the margin balance for the vast majority of stock companies declined significantly.

Specifically, the margin balance of the whole market declined to 138 trillion dongs at the end of the second quarter, a fall of around 43 trillion billion or 24 per cent from the end of the previous quarter and a modest gain (+3.5 per cent) from the previous quarter.

This decline was primarily caused by a decrease in investor demand and margin lending when the VN-Index fell 22 per cent from its all-time high of 1,528.6, which had a significant impact on investor sentiment. Additionally, a wave of interest rate hikes by several central banks could cause margin borrowing costs to rise in the future.

Despite a significant decline in the outstanding margin, the leverage ratio (Margin balance/total capitalization) on the Vietnamese stock market remained relatively high in comparison to other times, as estimated by using free shares of companies listed on HOSE and HNX.

The leverage ratio declined to 6.2% at the end of Q2 2022, down from 6.8% at the end of Q1 2022, which was also the period in which the margin outstanding amount reached its highest point. This rate is still relatively high compared to 5,7 per cent at the end of the first quarter of 2021 when the VN-Index was in the same range as it is today. This demonstrates that margin-related concerns remain in light of the market's lack of a genuine uptrend.

During the second quarter of 2022, investors' deposit balances declined by 17 per cent compared to the previous quarter, but the quantity of money available for purchase remained substantial. By the conclusion of the second quarter of 2022, investors' deposit balances on accounts at securities firms (excluding cash balances of overseas investors) had declined considerably (-14.4 trillion dongs, or -17 per cent) compared to the end of the first quarter. This is also the quarter in which investor deposit balances have decreased the most since the beginning of 2020.

In tandem with the trend of a rapid decline in the deposit balances of individual investors, individual investors sold aggressively in the second quarter of 2022. This quarter's net sales value for HOSE is around 7.2 trillion dongs, which is also the highest quarterly net sales value since the breakout of the COVID pandemic in early 2020. This indicates that the cash flow has been depleted.

When the market plummeted substantially in the second quarter, the market departed the market pretty aggressively. Positively, the investor's deposit amount is still relatively substantial at around 70 trillion dongs compared to the time before Covid or even the end of the first quarter of 2021, when the VN-Index was still at 1,200 points. This money is accessible on the account and may be awaiting an appealing future market entry opportunity.

In the first half of July, market liquidity continued to decline in comparison to June owing to sluggish demand and cautious investor mood. In the first half of July, the average trading value (for order matching only) on HOSE fell by -22 per cent compared to June and by 60,1 per cent compared to the average of the preceding active liquidity period (from May November 2021 to March 2022).

Individual investors net acquired over 1.3 trillion dongs in the first half of July, however, the emphasis was on VHM, VIC, MWG, HPG, and DCM equities before the selling pressure of foreign investors. Individual investors will maintain their net selling trend (almost 1,000 billion dongs) in the first half of July 2022 if this group of equities is ignored.

Upgrading to an emerging market may bring Vietnam an extra 10 billion USD in indirect investment; in the first year alone, Vietnam might get an additional 2 to 5 billion USD, and the cash flow is poised for more remarkable growth.

Anh Dung