In January, domestic retail investors made a sudden turnaround from the previous month as they sold mid-caps in brokerage and real estate and turned to blue chips in banking and retail.
The investment manager of VietNam Holding Ltd (LSE:VNH) said he still saw “lots of potential” for Vietnam’s economy as it “roared through to 2022”, but the investment trust was caught in a sale of mid-cap companies.
The country’s retail sales recorded a strong recovery of 1.3% and manufacturing PMI data also rebounded to 53.7 for January in what was the fourth consecutive improvement in factory activity after the easing of the the Delta wave of coronavirus.
Foreign direct investment disbursements surged as lockdown measures were lifted, rising 6.8% year-on-year to $1.6 billion, the strongest January in five years, while the Capital commitment to existing projects increased by 169%.
Dynam Capital Ltd (LSE:CAPD), the manager of the trust, said local retail investors continued to lead the Vietnamese stock market and were becoming increasingly sophisticated, although this led stock markets to enter the l year on a more volatile note, with a twisting divergence between blue chips and midcaps and an increased disparity in returns between sectors.
“These moves were largely due to profit taking by domestic retail investors, who continue to drive the country’s stock market and in January staged a sudden reversal from the previous month by selling mid-cap stocks in brokerage and investment. real estate and moving to blue chips in banking and retail,” Dynam said.
The manager’s ongoing research and market research over the past year indicates how quickly this growing group has evolved in such a short time, with more experienced “F1” investors now tending to refer to statements company financials when selecting stocks rather than looking at technical indicators as they did before.
“This could be due to the ever-increasing interest in online financial education via YouTube and other social media channels,” Dynam suggested.
Novice, or “F0” investors are now trying to detect market signals, whereas in previous waves they listened to what brokers recommended and before that they took advice from family, friends and insiders.
VNH saw its net asset value drop 3.6% in January amid heightened divergence and volatility.
“The blind sell caused all mid-caps to fall, regardless of fundamentals, and we considered many moves to be irrational,” Dynam said.
“We believe the overreaction is likely attributable in part to the high level of margin trading among retail investors. In any case, we have kept a steady hand and have chosen to remain largely still as the market moves. at breakneck speed and then began to recover in early February.”
The main positive contributors to the fund for January came mainly from the banking sector, while real estate suffered a correction after a strong performance in the previous months, as VNH reduced its holdings in the sector before the correction.
“Overall, the Vietnamese stock market is at its long-term valuation levels, and despite the January twists, we still see a lot of upside for 2022. Stock selection is still key in the markets. emerging countries like Vietnam and, as always, our eyes will be on companies well positioned for growth and making a positive impact,” the manager said.