Risk of losing all assets due to borrowing too much
Another “dark Tuesday” came to the Vietnamese stock market when the VN-Index plummeted, losing nearly 37 points in the session on October 3. After just one night, the market capitalization of the Ho Chi Minh Stock Exchange “evaporated” more than 144,000 billion VND, causing heavy losses for investors.
By the ATO session at the beginning of the stock market session on October 4, not only did the VN-Index not increase, but the downward trend was further reinforced when the VN-Index lost up to... 50 points, recording the deepest decline in 2023. After the ATO session, the VN-Index is limiting its decline, but there is no guarantee that the VN-Index will not continue to "fall" throughout the stock market session on October 4.
It can be seen that VN-Index is at risk of causing hundreds of thousands of billions of VND to “evaporate” from the market each session. However, that is not the biggest tragedy for rich investors. The biggest tragedy is Force Sell (liquidation) and financial Margin (leverage). Margin can cause million-dollar investors to “evaporate” all their assets in just a few sessions.
VN-Index dropped nearly 37 points, causing the market capitalization of Ho Chi Minh City Stock Exchange to lose VND144,000 billion overnight. The loss does not stop there but can be even heavier when the rich use financial leverage. Illustrative photo
Mr. Nguyen Duc Tung, a long-time stock investor, shared that he is currently very stressed because the stock market has fallen deeper than expected. The problem is that he used Margin to "go all in" on a code and that code has fallen quite deeply, so the risk of Margin Call (a call to notify payment to compensate for the decrease in value of the securities used as collateral) is imminent.
“I invest using technical analysis. In addition, based on the market situation, I predict that a stock will achieve extraordinary profits in the third quarter of 2023. Therefore, I decided to go all in (put all my money) on this stock. However, due to the sudden deterioration of the market, after only the first 2 sessions of 10, my portfolio decreased by 8%. The 8% decrease is not too important, but the important thing is that this stock is listed on HNX - where the amplitude is up to 10%. Therefore, if the sell-off continues in the next few sessions, the stock will decrease so deeply that I may be called Margin, or even Force Sell,” Mr. Tung worried.
Mr. Tung did not disclose his total investment portfolio, but only shared that he borrowed up to 20 billion VND, a very high leverage ratio. Therefore, once the mortgage is foreclosed, all his assets will be "lost". Therefore, at present, he is sitting on hot coals.
The market is still at risk of further decline.
Mr. Tung's fear of losing all his assets is... well-founded as the VN-Index is forecast to continue to decline.
Yuanta Securities Company believes that the market may continue to decline in the next session and the VN-Index may soon narrow its decline towards the end of the session around 1,118 points.
At the same time, short-term risks remain high, but technical indicators have fallen deeply into oversold territory, many stocks have fallen back to their lowest levels in the session on September 27, 2023, so selling pressure may increase in the early part of the next trading session.
“The short-term trend of the general market remains bearish. Therefore, we recommend that investors can stop selling and if the market recovers slightly in the next session, investors can consider buying with a low proportion. However, if investors have a low risk appetite, they should still stay out of the market,” Yuanta said, giving a less optimistic view of the VN-Index.
VCBS Securities Company also gave its opinion from a technical perspective, VN-Index took away all the recovery efforts of previous sessions and fell below the old bottom support area around 1,230 points. On the daily chart, the two indicators MACD and RSI are still pointing down negatively and have not shown any signs of forming a bottom. In addition, the ADX and DI- indicators are still trending up, indicating that strong selling pressure may still continue in the short term. If the pressure continues to weigh heavily, VN-Index could completely fall to the 1,100 point area.
“We recommend that investors proactively increase the cash ratio, maintain only 10% - 20% of the account's stock ratio, restructure and reduce the portfolio, and sell off stocks that have a tendency to lose support levels,” VCBS recommended to investors.
Source
Comment (0)