Panic selling sends VN-Index to biggest losing session in six months

Profit-taking pressure in the morning session had resulted in panic selling from investors and the VN-Index freefalling by over 74 points. However, sentiment seems to have stabilized in the afternoon, allowing the index to claw back 13 points by session-end.

This session was the benchmark index’s biggest single-session loss since last July 27, when it had plummeted 5.32 percent on confirmation of the first Covid-19 infections after the country had gone for 99 days without an intra-community case.

According to analysts, after gaining continuously for the past 30 days, during which the VN-Index rose by 124.48 points, a large-scale correction is not a surprise, but the severity of the freefall this session was a result of the large number of inexperienced investors participating in the market, and those using margin trading.

New investors had flocked to the stock market in the past months to ride the VN-Index’s impressive recovery as Covid-19 dampened the charm of other investment channels such as savings and real estate. According to the Vietnam Securities Depository, last December, over 60,000 new accounts were opened at securities companies.

These new investors, who are too optimistic and have little experience with strong market fluctuations, tend to panic and act in accordance to "herd mentality" when the market starts going down.

With a large proportion of cash on the Ho Chi Minh Stock Exchange (HoSE), on which the VN-Index is based, now coming from new investors, the flash crash seen in the morning is a natural consequence, analysts said.

The HoSE, by the end of the session was a sea of red with 437 stocks losing and only 44 gaining. Total trading volume was VND20.36 trillion ($886.5 million), its highest historically.

The VN30-Index for the stock market’s largest caps also plunged 5.63 percent, on which all 30 stocks ended in the red, eight of which hit their floor prices. This basket accounted for just under half of trading volume this session.

Topping losses were stocks in the banking sector. Of state-owned banks, BID of BIDV and CTG of VietinBank both floored with 7 percent, VCB of Vietcombank shed 4.2 percent, and MBB of mid-sized Military Bank floored with 6.9 percent.

Those of private banks that hit their bottom limit for the day were HDB of HDBank and VPB of VPBank, both down 7 percent, and STB of Sacombank, down 6.8 percent.

In the same sector, TCB of Techcombank and EIB of Eximbank tumbled 6.4 percent and 5.8 percent respectively.

The VN30’s other biggest losers were SSI of top brokerage Saigon Securities Inc., TCH of real estate developer Hoang Huy Group, and VIC of private conglomerate Vingroup, all down 6.9 percent.

They were followed by HPG of steelmaker Hoa Phat Group, down 6.7 percent, FPT of IT services firm FPT, 6.5 percent, GAS of energy giant PetroVietnam Gas, 6.2 percent, and POW of electricity generator PetroVietnam Power, with 6.1 percent.

The best performers this session were VRE of mall operator Vincom Retail, down 0.1 percent, REE of appliances maker Refrigeration Electrical Engineering, down 2 percent, and NVL of real estate developer Novaland, down 2.4 percent.

The HNX-Index for the Hanoi Stock Exchange, home to mid-and small-caps, and the UPCoM-Index for the Unlisted Companies Market suffered less serious losses, dropping 2.81 percent and 3.06 percent respectively.

Foreign investors seemed unfazed by the panic this session, net buying nearly VND130 billion on all three bourses, scooping up mostly VRE of Vincom Retail (down 0.1 percent) and VHM of real estate giant Vinhomes (down 4.2 percent).