08.03.2021, 17:03

Need for F0 investors to diversify

The stock market in 2020 saw a rise of F0 investors, who created waves from the very first quarter by reaching new peaks. The F0 investors were also the main driving force behind the market while the foreigners sold out. However, the stock market in 2021 will need to diversify, and perhaps it will not be as easy for F0 investors.


Need for F0 investors to diversify

Illustrative photo: Viet Chung

Future opportunities Many international organizations point out that the world has few options left, aside from continuing to pump money to support the economy. Even when vaccines prove effective, the low-interest policy of the Central Bank will remain. The loosening of monetary policy has also been raised to a higher level, when the Central Bank of China, South Korea, and Thailand added new weapons such as the Central Bank Digital Currency (CBDC). Accordingly, the loosening of monetary policy will not stop, even when the Central Bank has been digitized. This is consistent with the 4.0 era, as well as with the method to tackle the ongoing pandemic. Even after the pandemic ends, there will be many changes in business thinking as businesses will have more plans, products and services, and allow much more flexibility. So the stock market will be strongly supported by policy as well as transformation of the economy and enterprises. Therefore, the Vietnam stock market with companies and enterprises that apply well and create business efficiency will help attract more investment capital, thereby positively affecting the stock price. When the vaccine becomes widely effective, many industries will recover again and the economy will revive and so will the stock market. In addition, the world stock market will continue to rise to new heights, which will also support Vietnam's stock market. The control of the disease, and reasonable macro-management will help in attracting Foreign Direct Investment flow. This foreign cash flow will soon lift the market along with capital flow of individual investors, F0 investors, and strong domestic organizations. Concerns of market rise If we want the stock market to maintain a growth rate after a hot rise, as in 2020 that saw a huge level of liquidity, more cash flow and a faster economic recovery is needed. As the economy goes on a recovery momentum, financial assets have increased hotly which may easily lead to the phenomenon of bubbles, and the FOMO (fear of missing opportunities) syndrome may spread to F0 investors. Therefore, in the year 2021, the stock market has the ability to differentiate and diversify, meaning that the good stocks such as those that apply effective technologies in accordance with the changing business environment, will still make an impression on investors, and attract investment cash flow. This becomes clearer when the cash flow in the stock market currently is mainly from individual investors who are assessing the whole market. It will be difficult to maintain such a strong cash flow for a long time, especially since the margin ratio on the stock market is on a record high. Therefore, the cash flow will focus on businesses with good growth expectations, and flexibility in all circumstances. Even industries affected by the pandemic such as transportation, tourism, or energy will also recover. Stocks of companies with well-adapted post-pandemic buffers will also attract cash flow. It should be noted that loosening monetary policy in the last year caused cash flow around the world to flow into speculative assets. This year, when the disease is finally controlled, and the vaccines become effective, the policy will direct the cash flow into the economy instead of short-term speculative assets. In the long term, this will support the stock market, which is seen as a barometer of the economy. However, in the short term, cash flow may be more limited. In addition, foreign investors will still remain net sellers. So with only the cash flow of individual investors and F0 investors, the prices of many stocks will be at peak. The market may then be short of energy to set new heights. Other investment channels such as real estate have the ability to strongly recover after the pandemic. When monetary easing is maintained around the world, it can promote cash flow to find potential investment channels rather than assets that have been continuously increasing for a long time. This is also a threat to stocks. In addition, the stock market is seeing a big difference due to a strong increase last year when VN Index increased nearly 70%, HNX-Index increased 120%, while GDP increased 2.91%. This shows that the stocks have been valued at very high levels, so investors who lack knowledge will likely face many risks. F0 investors unexperienced During the whole of last year, most F0 investors easily won from stocks. Many F0 investors, even those who invested for a short few months or even just a few days, moved to invest the huge amount of money that they made in gold and real estate. However, the stock market is not a place where everyone who invests wins. Rather it is place where everyone is forced to learn, practice, and experience for themselves. New investors need to be careful in choosing good products to buy, because many enterprises increase the stock price several dozen times compared to its real value. Big investors remain humble and their success is always measured by their many years of stable dealings and familiarity of the market. This only comes with years of steady and continuous training and learning. Even when the market goes up or down, these big investors always make money, because increase or decrease is a part of the market, but making money is their main focus. This is why few F0 investors in the long term can hold out money in the market, which only professional investors know how to do. These are the skills that new investors need to cultivate with knowledge and with continuous experience to improve their ability and investment knowledge.

Khanh Phan