Although all the microeconomic and macroeconomic benefits are available, there seems to be no key catalyst for a new level of growth in the stock market.
Early statistics show that around 600 companies disclosed their financial statements in the second quarter of 2022. The number could be a bit higher if all estimated figures were actively disclosed. The figures will be continuously updated over the next few days, but the sales and profits of listed companies will increase positively. For example, according to estimates from Vndirect Securities Corporation, considering 590 listed companies as of July 26, total sales and profit in the second quarter increased by 25.3% and 17.9% respectively, compared to the same. period last year. Large-cap stocks over VND 10 trillion saw an average increase of 34.3% in sales and 24.9% in net profit.
It is certainly normal for the stock market to have dark and light shades. As is the case with the tourism and aviation section which continued to suffer huge losses. The securities section varies widely, with the high profit group including VND, SSI, VCI and HCM while the huge loss group includes SHS, BMS, TPS and APG. This type of variation is quite easy to predict because it is very logical. The Covid-19 pandemic made the recovery of the tourism industry extremely difficult and the fall in stock prices from April to June caused heavy losses in securities, particularly in the self-trading and brokerage.
On the other hand, the oil sector saw its sales rise sharply by around 85% in the second quarter, compared to the same period last year, as total profits increased by a factor of 4.5. The chemical section’s stock value also soared 178%. Even the value of energy stocks has seen great changes. The growing demand for electricity has allowed companies in this section to do very good business. Hydropower companies are enjoying some benefits while coal and gas power companies have experienced some setbacks due to rising oil prices.
Even though sales and profits vary greatly from company to company, the market is generally enjoying a boom period in most listed companies. Second-quarter earnings figures are gradually adding to the general market estimate value figures, while the VN index still remains at its lowest. This creates an obvious effect that the market price decreases. As of July 28, HoSE’s P/E ratio was only 12.5x. It should be noted that the P/E ratio of the HoSE was at its lowest in March 2020 by 10.3 times.
Several analyzes have pointed out that the current market price is very low compared to the average price of the past. For example, the average P/E ratio of the market over the past five years was 16.3 times, or the average over the past ten years was 14.5 times. The market price is falling, but the Vietnamese stock market has not risen since early July. This seems like a very difficult paradox to understand.
However, such a comparison with the past is not always appropriate, especially when looking at the representation of the VN index. The different earnings, as well as the cyclical outlook for stocks, create a market period that is totally different from the past. Stocks and market prices no longer rise together, but now cash flows in the market seize different opportunities, depending on sections and industries, and in several cases, this is more likely to have negative effects on the NV index. It is true that only the prices of specific stocks are rising, but the indices have not risen.
The top ten Vietnamese companies by market capitalization are able to regulate the VN index, namely VCB, VHM, VIC, GAS, BID, MSN, VNM, NVL, CTG and TCB have shown almost no growth since the beginning of July or have generally set their growth equal to their losses. VCB was up 0.3%, VHM was down 5.6%, VIC was down 9.5%, GAS was down 6.9%, BID was up 6.1%, MSN was down 1 .2, VNM increased by 3.5%, NVL decreased by 1.1%, CTG increased by 3.3% and TCB increased by 3%.
It is evident that slippage appeared in all of the top six except for VCB which rose by a minimal percentage, while stock prices of smaller companies by market capitalization saw a better rise. There have been a lot of complaints about why the VN index has never been able to break above 1200 points. Some even said that the market had not progressed for decades because the milestone of 1,200 points appeared as early as 2007! No one would raise this point if they fully understood that the history of the VN index is not the history of the market, much less the history of stocks.
Differences in the current market period made it impossible to make any proper comparison with the past, in terms of scope. Throughout its history, the VN index has only reached the 1,200 point mark twice, in 2007 and 2018, and only exceeded it in April 2021. During these periods, the number of newly issued shares increased by high percentage points, especially in the second half of 2021 and early 2022, when strong increases in share prices allowed companies to successfully issue a large number of shares.
Besides paying dividends with shares, a large number of issues in a short time actually took huge amounts of cash out of the market and money transferred from investors’ accounts to the accounts of the issuing company. shares. The market does not have enough liquidity when there are too many newly issued shares, which makes new waves of increases extremely difficult, unless new flows of cash are added to the market. There is a bigger issue of a cycle of monetary easing, if not tightening, which is very likely to occur worldwide in the near future.
Hence the question of what this means for the market, if it has no chance of improving, or where the opportunity for growth lies. The large differences in corporate earnings in a cash-strapped situation require investors to be more active and smart. Most investors only moved their money between industries and sections in the form of speculation. This means that a good increase in one section would result in no increase in another section. The current market cycle is how money is moved between sections when groups of companies tend to rise over the long term.