Global financial markets remain unpredictable

Saigon Investment
(Saigon Investment) - Since the sudden and virulent outbreak of the Covid-19 pandemic very early this year, the global financial markets have become unpredictable and in disarray. 

Bitcoin has increased to four times of its value since the beginning of 2020.

Bitcoin has increased to four times of its value since the beginning of 2020.

However, after suddenly falling in the first quarter of the year, markets were seen to suddenly recover strongly in the second quarter, which was quite a paradox as the pandemic still continues to rage. Therefore, any forecasts for the global financial markets for the coming year will still remain uncertain and unpredictable.

Record price increase

At the beginning of the second quarter, when the stock markets rebounded surprisingly and real estate liquidity improved in the third quarter, suddenly the FOMO syndrome exploded on us. FOMO is a short form of “fear of missing out”. It is a real life phenomenon or experience that can cause a great deal of stress as people begin to feel they are missing out on good and better opportunities while other people are enjoying all the benefits. It exists in the form of a strong feeling or perception.

A huge number of new stock accounts began opening suddenly in the second quarter, and financial transactions across the US, Europe and Asia skyrocketed as people had more spare time and could work effectively online. In particular, when gold prices rose to historic highs in the middle of the year, the US, Asian, and European stocks also continuously kept reaching historic heights as well. Towards the end of 2020, when Bitcoin suddenly surpassed its previous peak of 2017 of USD 20,000 to USD 27,000, this currency increased by almost 35 million times since it was first traded eleven years ago. Currently, this Bitcoin accounts for about 70% of the crypto currency market and surpasses any other record price increase in the history of the financial market.

In 2020 alone, digital currency increased four times since the beginning of the year. Even the lowest level Bitcoin increased by almost seven times, surpassing the current popular Tesla stock. The phenomenally huge rise in Tesla stocks helped Elon Musk to rise from 40th ranking of the richest person in the world to a number two position. Elon Musk is also the first billionaire in history to earn nearly USD 150 bn in just one single year. Tesla also became the carmaker with the largest market capitalization, more than all the other six bigger car manufacturers, namely, Toyota, Volkswagen, Daimler, General Motors, BMW, and Honda.

In the domestic stock market, the VN Index only increased by about 20% compared to the beginning of 2020, but by 70% if calculated from the lowest level, and it reached to nearly 1,100 points, and the HNX Index more than doubled to approximately 200 points. Although the stock indexes are still quite far from reaching a historical peak, with this increase in 2020, the Vietnam stock market is seeing a leading historical high. The year 2020 also marked a phenomenally record high number of individual investors who opened accounts on a monthly basis accounting for the highest market liquidity in history.

However, there is a paradox that in the context of monetary easing by countries everywhere, the global economy is still in trouble and debts are piling up. Statistics from many sources show that global public debt is currently exceeding USD 80,000 bn. Total debts of public debt, corporate debt, household debt, and personal debt also have hit USD 280,000 bn. There is a lot of money, a lot of debt, but most of the above sources run into financial assets such as securities, real estate and gold. People can also now work online instead of going on the streets to make money, and avoid the infection in the pandemic. This is why the K-shaped model will be created in 2020, which will show that the economy is still struggling but the asset bubble is close by. This makes Bitcoin a safe asset and a haven for cash flow due to a limit of only USD 21 mn this year.

Rise of digital economy

All throughout 2020, digital economy and digital finance have been constant topics of discussion, especially with the coming of the 4.0 era. For example, recently, the billionaire Elon Musk used his online personal page to discuss with investors the ability of Tesla to convert "big deals" on Tesla's balance sheet into Digital Securities. Investors believe that Elon Musk's Tesla will soon digitize shares into Digital Securities.

Mr. Stani Kulechov, Aave CEO, wants Tesla to join Decentralized Finance (DeFi), a form of Stablecoin anchored with real stocks. Currently, many technologies and technology platforms are becoming more and more useful, and the speed of practical applications are increasing rapidly such as DeFi, Electronic Securities, and Digital Finance. For example, in just one year, DeFi's scale of application and investment in the world has increased hundreds of times.

In the stock markets in Vietnam, companies that are doing well create business efficiency that helps attract more investment capital, thereby positively affecting share prices. However, because the economy is still on a recovery momentum, but the financial assets have increased hotly, a bubble phenomenon easily occurs when the FOMO phenomenon spreads with F0 investors.

Therefore, in the coming year in 2021, stocks will show signs of differentiation, meaning that the stocks will be good and will effectively apply technologies to businesses, such as Tesla in 2020, and also there will be a rise of innovating products and services. The business environment will make an impression on investors, thereby attracting more cash flow. In contrast, companies that do not adapt will certainly go down. It is forecast that maintaining a strong cash flow will focus on key areas and sectors affected by the pandemic such as transport, tourism or energy, and stocks of those companies with good post-pandemic adaptability.

After a relatively positive year in the real estate market, with the sole exception of the rental segment, it is difficult to see prices fall on a large scale. Other segments of businesses all improved on liquidity in the second half of 2020, with even higher prices compared to 2019, mainly due to the cash flow pouring into investment channels and real estate benefiting from the traditional channel. However, in 2021 there will be a divergence when the cash flow is more regulated to boost and revive the economy and limit the risk channels with large speculation factors such as real estate, securities and non-priority segments.

On the other hand, although gold did impressively well in the first half of 2020, it fell in the second half of the year when stocks, real estate, and Bitcoin began to peak. However, gold will still remain a defensive channel, especially in a short bull-run cycle, while stocks and real estate have a long cycle, so gold is easier for quicker cash flow. When various policies direct cash flow to rebuild economy, the price of gold is forecast to go up and may even maintain the same strong growth rate as in the earlier part of 2020.

Phan Dung Khanh, Investment Advisory Director, Maybank Kim Eng Securities Joint Stock Company (MBKE)

Các tin, bài viết khác

Đọc nhiều nhất