Liquidity “disillusionment” could improve, matching value on HoSE decreased by 16% after one month of T+2 application

After 1 month of applying T+2, stock trading was still gloomy despite many strong fluctuations in the market in a downward direction. The average matching value on HoSE was less than 11,800 billion dong, down 16% from the previous month and the second lowest since the beginning of 2021.

The stock market has just experienced another gloomy session despite having an exciting start after the news that GDP grew by 13.67% in the third quarter, surpassing all previous forecasts. VN-Index reversed to decrease by 17.55 points (-1.53%) with less than 11,100 billion dong of liquidity, of which the matching value on HoSE only stood at 9,160 billion dong.

Since the beginning of September, the average matching value on HoSE is less than 11,800 billion dong, down 16% from the previous month and the second lowest since the beginning of 2021, just after the period of July. This is in stark contrast to investors’ expectations that the market will be active again after the application of the new payment cycle T+2 (from August 29).

Transactions are gloomy in September despite strong market volatility

Previously, the T+2 catalyst was expected to create positive effects on market liquidity when shortening the payment time to half a day, thereby increasing the transaction turnover of investors. As a result, investors are also able to respond more quickly to market fluctuations and improve profitability. Some experts even forecast that the liquidity could increase by 20-30% depending on the market excitement.

However, up to now, that is, one month since investors were able to trade under the new payment cycle T+2, market liquidity has not only not improved but also become more attractive. In many trading sessions in September, the matching value on HoSE even fell below 10,000 billion dong, a rare low figure in the month right before the T+2 cycle was applied.

Normally, trading will be more active during periods of strong market volatility, especially in the downtrend. However, even in recent deep decline sessions, the bottom-fishing cash flow was still quite “indifferent”. The reason may come from the concern that the market is still turbulent before the pressure from the interest rate increase trend.

After the Fed officially raised interest rates by 0.75 percentage points for the third time in a row, it also sent a message that it will continue to tighten monetary policy until inflation is completely controlled. The State Bank of Vietnam (SBV) has also decided to raise a series of operating interest rates from September 23. Accordingly, the ceiling interest rate for deposits with terms of 1 month to less than 6 months increased from 4% to 5%/year; refinancing rate also increased from 4% to 5%…

According to some experts, rising interest rates are likely to negatively affect securities in a number of ways (1) increasing the cost of capital of enterprises, affecting profit prospects and economic growth; (2) the discount rate in valuation models increases, causing stock valuations to fall; (3) higher margin borrowing costs, affecting investment efficiency.

In addition, the increase in deposit interest rates also has a significant impact on securities as savings are the most likely alternative investment channel at this time. In fact, the cash flow into securities is no longer as abundant as before due to (1) money withdrawn to reproduce and do business after Covid; (2) stuck in the real estate market; (3) the impact from the tightening of corporate bond issuance after the events that occurred at the beginning of the year.

In fact, after booming in the period of May and June, the wave of new investors has also cooled down recently. The number of new accounts opened by domestic investors continuously dropped sharply and reached the lowest level since November 2021 in August. The new cash flow is not really abundant while the available money in the market is cautious, making the transaction increasingly gloomy.

Not only domestic cash flow was short of breath, foreign investors also had a “turning” move when they sold strongly on HoSE from the beginning of September with a value of more than 3,200 billion dong after buying about 2,500 billion dong in the first 8 months of the year. The Fed’s move to accelerate money withdrawal is expected to cause capital withdrawal pressure globally, especially in emerging and frontier markets, in which Vietnam is no exception.

However, these difficulties may be short-lived. VNDirect believes that it is unlikely that there will be another increase in operating interest rates in 2022 after the recent rate hike. According to Dragon Capital, the Fed has also signaled that it is likely to stop raising interest rates in the first half of 2023 and this is the period when investors can expect a more stable monetary policy in Vietnam.

In the long term, the prospect of Vietnamese securities is still considered positive and is an attractive investment channel thanks to its high profitability. According to PYN Elite Fund, Vietnam’s stable economy and sustainable income prospects will push the stock market to quickly rebound once the uncertainty subsides.

According to this foreign fund’s forecast, GDP growth could reach 7.5% this year and the profits of listed companies could grow by 25%. Vietnam’s stable economy and sustainable earnings prospects should prompt the stock market to bounce back quickly, once the uncertainty subsides. “When the storm is over, the sky will shine again,” emphasized the PYN Elite manager.

Ha Linh/Market Lifestyle