Economy - May 29, 2022 | 05:23 pm PT

Plunging stock market gives the jitters to amateur investors

Amateur investors are rethinking their decision to enter the stock market and some are even considering quitting to prevent further losses following the VN-Index’s losing spree.

With seven out of eight stocks in his portfolio in the red, some of them by up to 35 percent, Hoang Minh of Hanoi has deleted the trading app on his smartphone.

"I have spent most of my savings on stocks, and there is not enough money to average," the 30-year-old tech worker, who opened his first trading account four months ago, said.

With an investment of VND100 million ($4,300), he was 30 percent in the black after buying some speculative stocks when the index went past 1,500 points in early April.

But the unexpected collapse means his portfolio has fallen to 20 percent below cost.

"I am considering selling three or four stocks at a loss since it is unlikely they will rise back again," he says.

Minh is among many retail investors whose dream of getting rich quickly was shattered by the plunging market in the last few weeks.

After finishing last year as one of the best performers in the world with a rise of nearly 36 percent, the VN-Index started this year strongly by reaching a new peak of 1,528 points.

Analysts were optimistic it would be another thriving year, and some even forecast the benchmark to jump to 1,850 points.

But several factors such as the arrest of company leaders for allegedly manipulating the market for personal gain, the rising risk of global inflation and the Russia-Ukraine crisis sent the market plunging since the first week of April.

The VN-Index has lost over 16 percent since the January peak, with many blue chips losing in double digits.

Huong Trang, who became a stock investor seven months ago, last week posted a question on a Facebook group with over 500,000 investors about what to do with her declining portfolio.

"My investment has dropped by 29 percent, and I don’t know whether to put more money in now to reduce the loss or to sell the plunging stocks," said the 28-year-old tour guide in Hanoi, who invested in blue-chip stocks such as Techcombank and the country’s biggest private conglomerate, Vingroup.

Some of Trang’s friends have advised her to stop investing altogether and sell out whatever the prices, while some brokers have invited her to join their consulting groups on Zalo for a small fee with promises of double-digit profit.

"I am really confused. I regret entering the market in the first place."

Stocks surfaced as a new asset class for many Vietnamese investors during the two years of Covid-19, with 1.53 million people opening trading accounts last year, 50 percent more than in all of the previous four years, according to the Vietnam Securities Depository.

As of last month more than 5 percent of the population were stock investors, meaning the government’s target was achieved three years early.

Stock brokerages said in the last year retail investors had the greatest impact on the market by accounting for over 80 percent of trading.

But many new investors, who had only been trading for a few months, quit the market after making losses, Le Chi Phuc, CEO of investment fund SGI Capital, said at a recent forum.

Financial expert Tran Dinh Phuong said most people are speculators who focus on short-term gains and are easily affected by a herd mentality.

Many so-called investors lack knowledge and experience and sway easily, and that is why the market has been seeing strong losses, he added.

Economist Tran Thanh Hai said the Vietnamese stock market does not reflect the health of companies, with many stocks surging despite companies’ poor performance.

The recent arrests and punishment of stock manipulators and even officials has shown that the government is going in the right direction in improving the transparency of the stock market, he added.

But despite the dip, some analysts are still confident about the long-term scenario.

HSBC said in a recent note that it is confident about the long-term prospects of the market as companies have been "on a roll" in terms of growth and profits in recent years.

Foreign investors still have room in blue-chip stocks, the country’s export potential remains strong and there is a possibility of Vietnam being upgraded into an emerging market, and all these make it an attractive market, it said.

With the VN-Index showing signs of recovering in the last two weeks, Minh’s hopes have started to rise again, but he is wary of investing further.

"I used to have high expectations of profits, but I have found it is not easy to make money in stocks."

By Dat Nguyen