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Which industry should investors choose when money is no longer abundant?

Trường Lăng

August 9, 2022

News

Which industry should investors choose when money is no longer abundant?

Trường Lăng

August 9, 2022

According to experts, when public investment accelerates, the electricity industry will benefit. On the other hand, every time the money is pumped and withdrawn to regulate the liquidity of the banking system, there will be a number of industries that follow the cash flow.

From the beginning of 2022 until now, variables have increasingly appeared randomly, especially those related to geopolitical tensions, which requires Vietnam’s monetary policy to be flexible. This, according to experts, will be detrimental to the stock market. In that context, which industry to choose is a question that many investors are interested in.

IS CURRENCY MAKING IT DIFFICULT FOR STOCKS?

At the seminar “Financial Market Outlook: Opportunities and Challenges” organized by Vietnam Wealth Advisors (VWA), Tran Le Minh, Hanoi branch manager of Dragon Capital Vietnam, said that economic targets in 2022 will remain stable and within the target set by the Government. However, the market is facing a risk of tightening monetary policy.

According to him, money will be expensive and not abundant, interest rates may increase very strongly at the end of the year, but it will not be obvious to investors.

In fact, the tightening of monetary policy is already happening. Specifically, from 2012 to 2020, the State Bank of Vietnam has conducted eight open market operations (OMO) to adjust interest rates from 6%/year to 2.5%/year. And so far, interest rates have shown signs of increasing again with interest rate bidding. And as interest rates rise, commercial banks’ capital costs will also increase accordingly.

On the contrary, only when commodity prices confirm a clear downward trend, will the State Bank officially issue an order to loosen monetary policy again.

“The case that the petroleum fund is side-pocketed and the environmental tax is raised again by the government is a sign that people can be assured that the State Bank may actively loosen monetary policy,” Mr. Minh said.

At the same time, he said, for Vietnam or any other country, tightening monetary policy is always accompanied by negative factors for the stock market.

Dr. Quach Manh Hao, a lecturer at Lincoln University in the UK, founder of QMV Group, shared that stock value relies heavily on investor sentiment as well as cash flow in the market.

From the second half of 2020 to the end of 2021, there are many cases of companies circumventing credit through bonds. By the time the short-term deals were done, the money was no longer in the stock market because companies began to settle bonds before maturity.

“The money is gone, causing the liquidity as well as the official stock index to enter the correction. Going forward, the State Bank’s tightening of the currency is also a risk that investors need to pay attention to,” said Mr. Hao.

WHICH INDUSTRY CODE TO INVEST IN?

Also according to Mr. Hao, tightening monetary policy is currently only a potential risk such as short-term money withdrawal, no credit room expansion, the exact level cannot be concluded.

Most recently, the State Bank net withdrew about 170,000 billion dong on the treasury bill. Immediately after, the liquidity of the system was strained, and the operators were forced to net pump back through OMO and let the bills mature.

Currently, the stock market reacts very sensitively to the above pumping action. When money is withdrawn, stocks fall. On the contrary, money is pumped, stocks rise.

Therefore, in the current context, most investors’ actions will be quick and short in and out. And especially, according to Mr. Hao, each wave of ups and downs now has the presence of banking, stock and real estate groups.

“If you look at it from a cash flow perspective, investors only need to focus on the above 3 groups of industries to have opportunities. But please note that it is only a short-term direction in the T+ way,” emphasized Mr. Hao.

According to Mr. Minh, for new investors, the current period is the time to adjust expectations. History shows that, in the past 10 years, the average profit expressed through the VNIndex is about 12 to 14%/year. So in the next 2 years, an expectation of 14% per year is reasonable.

“If you think in your mind that you will buy a certain industry code and multiply it by 2 or 5 times, you must adjust it immediately. It is this thinking that will make investors lose money in the near future. If you want to be sure, buy a good code and keep it for 5 years for sure profit. A good code is the steady and continuous growth of revenue over a long period of time, “Mr. Minh shared.

Mr. Minh said that in the short term, the electricity industry will receive many advantages from public investment activities. “Because, economic management is based on two tools including monetary policy and fiscal policy. For a long time, only monetary policy has been implemented, while fiscal policy has not been used much. Now, for the economy to move quickly, both policies must be used, which forces the fiscal policy to work more. If that’s the case, the electricity industry will definitely benefit,” Mr. Minh stated.

Source : VNEconomy

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