Rise after the fall: positive prospects for VN-Index

February 10, 2020 | 17:30

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Despite the VN-Index’s sudden drop brought about by the coronavirus outbreak, the local securities market is poised for growth.

rise after the fall positive prospects for vn index

The VN-Index lost all the gains of 2019 in only three days, but every fall precedes a rise

The health crisis has been a blow to the global stock exchanges, including the Vietnamese market. Specifically, ending the session on February 4, the VN-Index dropped to 929.09 points, down 3.32 per cent against the beginning of the year, and has been listed among the top 10 stock indexes suffering the largest drop since then.

The virus outbreak has cost the VN-Index 100 points – all gains achieved throughout 2019 going up in smoke in just four days (January 30-February 4).

Securities company Mirae Asset assumed that although the epidemic has hit the local exchanges hard, signs of growth remain and it could be an opportunity to buy stocks of good prospects.

Oversold stocks pave opportunities for medium- and long-term investors

“Investors should not be pessimistic because a sharp fall is still preferable to a lasting downturn,” said Le Quang Minh, analyst director at Mirae Asset. “The VN-Index has seen many tough fluctuations, where long-term declines discouraged investors seriously. Therefore, with the quick drop caused by the epidemic, investors can start again.”

According to the securities company, a positive sign is that the reduction has improved liquidity. For instance, on January 30, when the fall began, liquidity saw an immediate boost of 30 per cent against the last three months. Liquidity also rose by 49 per cent on the second day of the downturn of the VN-Index and even reached 68 per cent on the following day.

“Many investors are stock prices to drop low enough to purchase,” Minh emphasised. Accordingly, the virus outbreak has a certain silver lining for the stock market. Not only Vietnam but also the US and Hong Kong markets are also forecast to rebound later on.

Stocks with bright prospects for investors

Insurance stocks have experienced a 15 per cent decrease in points – the biggest drop in the local stock exchange. Minh from Mirae Asset said that since the outbreak, demand for purchasing health insurance has been on the rise. This is expected to improve prospects for the sector.

The sector with the second-largest drop is utility stocks with 10 per cent. Specifically, the temporary halt in manufacturing has reduced water consumption. “However, it is an essential utility segment, so it will recover soon.”

On the other hand, pharmaceuticals and healthcare equipment manufacturers have not suffered a reduction. According to Mirae Asset, investment in these sectors is difficult due to low liquidity. Therefore, only a few investors have benefited from the health crisis. As a result, their increasing momentum may not last long.

By Van Anh

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