Stop dissing new kids on the stocks block, they're saviors

January 31, 2021 | 04:38 pm PT
Hai Ly Journalist, author
Last month, when the VN-Index had a flaming red session with 74 points being lost, a lot of criticism was directed at F0 investors.

They were "investing following the trend, following the crowd, not researching businesses carefully and buying every time it goes up," the critics whined.

The impression was that the F0 (nickname for beginners) were uneducated investors with no proper knowledge, craving profits to the point of being reckless.

A reality check is called for, I think.

Of course, every generation of investors has people who just follow the crowd, and there is the possibility that even following the crowd might not be a bad thing in the end. However, from my personal experience of interacting with them, I know that most of these investors are university students, foreign students, white collar workers, employees in the banking and financial sector and those working for other businesses.

They are knowledgeable about stocks, the equitization of state-owned enterprises, the economic crisis and the pandemic. More importantly, they are young, dynamic, and carry the breath of the age of technology and the future.

Of course, the F0 generation also includes the elderly, people who have retired and are factory workers, but even they still do their research before investing.

I shared the "F0" story with Dominic Scriven, chairman of private investment firm Dragon Capital and a person with 25 years of experience in Vietnam's stock market. Back in July 2020, when the VN-Index had just recovered by some 30 percent from a bottom of 650 points, he predicted that "the F0 generation will be a long-term trend of the market."

Everything that investors from the Fn generations – those that have been participating in the market since 2000 – have experienced, has also been experienced by Scriven, including an incident in which the largest fund managed by Dragon Capital was almost dissolved during the 2008-2010 crisis.

However, this did not prevent him from sincerely admiring the way of thinking and actions of F0 investors.

By observing from an international perspective, he realized that the dynamic F0 generation had foreseen the cheap cash flows and inflation of the future, so they invested in stocks and raw materials as a way to preserve their assets.

"They were right," Scriven concluded, adding that he now regrets not purchasing tech stocks like Apple, Amazon, Google and Tesla as they had done.

A young woman registers a stock trading account at the VNDIRECT Securities Company in HCMC, January 2021. VnExpress/Quynh Tran.

A young woman registers a stock trading account at the VNDIRECT Securities Company in HCMC, January 2021. VnExpress/Quynh Tran.

Vietnam's stock market, being in line with the global market, has had nearly 10 consecutive months of ascent and only experienced a strong correction upon reaching the record-high peak of 1,200 points. This correction was probably just procedural in a market where many beneficial factors are converging.

The dong interest rates have never been as low as they are now. To support the economy, monetary policies are likely to maintain the low interest rate regime for a relatively long time.

Investment channels such as gold and foreign currencies are falling out of favor, while real estate requires large capital amounting to billions of dong. Also, they cannot be traded as quickly and as easily as stocks.

There is no force that can increase the attractiveness of stocks as much as low interest rates.

Changing perspectives

Furthermore, some of the traditional perspectives on stocks are changing. For instance, the assessments of an expensive or cheap stock market, of a good basic business or of a trendy industry in the economy are all imbued with the perceptions of investors in the F0 generation.

In the U.S., electric car company Tesla's share price has increased by approximately 12 times in the past nine months, from $72.3 to nearly $847 per share as of January 22, 2021.

Tesla has an unimaginable P/E ratio of 1,677 times. Some say "the absence of speculation in the market of Tesla shares" is incorrect and incomplete, but why is Tesla's share price still so high then?

Tesla is not simply an electric car company but also a tech company, and the generation of F0 investors realize the impact of technology on people's lives and on protecting the environment.

Just the fact that electric cars can travel long distances on battery power without causing emissions or polluting the environment is enough to attract billions of people who want to breath fresh air.

Tesla electric cars are among the symbols of technology in the present and for the future, not to mention the technological improvements to algorithms that the company is researching and applying.

This could help explain why there were, are and will be shares with "crazy" price surges in multiple stock markets, and Vietnam is no exception.

Opportunities for thousands of stocks listed and registered on Vietnam's three stock markets are still plentiful as the F0 generation imbues them with their way of thinking in the Covid-19 era.

Just a dozen months ago, who could have imagined that billions of people across the world would have to socially distance themselves, that the aviation and tourism industries would be struggling, that hospitals would be overwhelmed by the number of new cases each day, that many countries' central banks would have to print money to prevent their economies from collapsing?

In Vietnam, just in the month of December 2020, more than 63,000 new securities accounts were opened. If each of these accounts receives VND300 million from its investor, the market would already have an additional capital flow of nearly VND20 trillion.

Let this sink in - it's the F0 generation that has "saved" Vietnam's stock market.

The era of domestic investors following the trading of foreign investors is over. In 2020, foreign investors net sold VND16 trillion on HOSE, HNX and UPCoM, but this has not had much significance. The cash flow from F0 investors has not only been enough to balance out the net selling of foreign investors, but also enough to make it the driving force of the market.

Covid-19 has helped make F0 investors a new important part of Vietnam's stock market.

Looking back, after 20 years since its inception, Vietnam's stock market has become one of the important capital channels of the economy. The Ho Chi Minh City Stock Exchange went from just having two listed companies, REE and SAM, to having a market capitalization equal to 69.72 percent of the GDP in 2019 with nearly three million accounts opened and trading.

So, with F0 investors in the fray, and with Vietnam's new standing and position on the international stage, the stock market is sure to experience breakthroughs this year.

*Hai Ly is a journalist covering Vietnam's finance, baking and stock market. She is the author and co-author of several books on macro-economy. The opinions expressed are her own.

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