Will the Vietnam stock market bring early profits to investors this year?

In the Year of the Rat (2020), the market rose by 3.3% about a month before the Tet festival but declined by 8.9% afterward. This was an exceptional year due to the outbreak of the COVID-19 pandemic. Even during Tet, the entire country was overwhelmed by this information, according to Mr. Đào Hồng Dương, Director of Sector and Stock Analysis at VPBank Securities (VPBankS), in the program “Vietnam and Market Indicators.”

According to Mr. Dương, in the Years of the Tiger (2022) and the Ox (2021), the VN-Index dropped in the 22 trading sessions before Tet, but increased significantly afterward. In the Year of the Ox, the market decreased by 4.5% in the 22 sessions coming up to Tết. This was significant given that the VN-Index's annual variation has been approximately 12-14% in recent years.

In three of the last five years, the market has increased after Tết, with two years experiencing significant growth (over 4%). It is worth noting that 2020 was an exceptional year owing to COVID-19.

"Visually, I observe that the market tends to have a more positive outlook immediately after the Lunar New Year. In my opinion, several factors contribute to this phenomenon.

Firstly, before the long Tet holiday, investors often allocate funds to fixed-term deposits to ensure the best returns.

Secondly, after Tết, investors generally have a more optimistic sentiment. Additionally, by February, listed companies’ financial results are fully disclosed, and the annual general meeting (AGM) season begins, bringing supportive information in March, April, and May, which helps boost market liquidity.

In terms of liquidity, trading volumes in the two months before and after Tết are usually lower compared to previous months. If the market is active before Tết, liquidity tends to decline afterward," Mr. Dương analyzed.

With the detailed insights and statistics mentioned, investors have a solid basis to decide whether to invest in stocks to await the "spring fortune."

Investors can compare the average trading volume for the 22 sessions before and after Tết. According to VPBankS statistics, if the market was active and upbeat prior to Tet, liquidity typically declines afterwards. In contrast, if liquidity was low prior to Tet, it usually improves following. This is a simple signal to monitor and use for market forecasting and investing decisions.

Mr. Đào Hồng Dương emphasized that patience is an advantage. The more patient investors are, the more accurate their scientific and calculated approach will be, helping to minimize psychological influences.

When the market is in a low-liquidity, lackluster state without a clear trend, investors tend to feel discouraged, whether they are holding stocks or looking for good entry points.

However, it is essential to remember that the market always rewards those who know how to wait for the right moment. The ideal time can be determined through fundamental analysis, technical analysis, or even by tracking market cash flow trends.

"I believe that with enough patience, continued market observation, and finding the right moment, investors will reap deserved rewards," Mr. Dương emphasized.

Experts also pointed out that the market is largely divided into two investment styles: growth investing and value investing, which are both applicable to fundamental and technical research.

Growth investment through fundamental research entails selecting companies that are likely to increase in profitability, asset size, and equity, with stock prices reflecting these elements in a sustainable manner.

For growth investing via technical analysis, investors seek entry points when a stock is in an uptrend, accepting higher purchase prices when breakout signals, volume, and indicators confirm an upward trend.

On the other hand, value investing through fundamental analysis involves buying stocks when they are undervalued relative to intrinsic value, gradually accumulating them to achieve a low average cost. Investors profit when the market reflects the stock’s fair value.

Technical analysis also provides similar strategies. However, it's important to note that buying stocks in a downtrend is relatively risky. Investors should combine fundamental analysis to identify attractive valuation levels.

If the market is moving sideways, Mr. Dương suggests buying stocks when the index reaches the lower price channel, assuming no unfavorable macroeconomic or business-specific circumstances. Investors can profit by selling when the index reaches the top barrier.