HO CHI MINH CITY, 2022 MINISTRY OF EDUCATION AND TRAINING THE STATE BANK OF VIETNAM HO CHI MINH UNIVERSITY OF BANKING LUU THANH HUONG IMPACT OF COVID 19 ON VIETNAM’S STOCK MARKET GRADUATION THESIS MAJ[.]
RESEARCH OVERVIEW
Introduction
The outbreak and spread of the novel coronavirus disease (COVID-19) worldwide has severely affected production and people's lives in general Economies around the world are currently facing serious challenges due to the COVID-19 outbreak Due to fear and uncertainty, and to a reasonable assessment that corporate profits are likely to be lower due to the impact of COVID-19, the global stock market has erased about $6 trillion in wealth for the week from February 24 to February 28,
2020 Particularly for the Vietnamese stock market, right in the first outbreak of the outbreak, the VN-Index decreased by 36% in value compared to the end of 2019
He et al (2020) believes that the impact of COVID-19 on the economy is not the cyclical volatility of traditional economic development The short-term catastrophes caused by the pandemic also surpass any endogeneity and extreme events of the past Assessing and understanding the economic impact of COVID-19 has become a critical issue.
The traditional economic and financial theory holds that stock prices are affected by market and firm characteristic-based factors Companies in the same industry face the same regulatory and policy environment and similar macroeconomic conditions When faced with changes in the economic environment, the operating conditions of companies in the same industry are highly correlated (Moskowitz & Grinblatt, 1999) According to the theory of behavioral finance, in addition to the basic value of stocks, emergencies will have an impact on investors’ psychological and behavioral factors, which in turn will have an important impact on stock prices Lee and Jiang (2002) believe that investor optimism will reduce earnings volatility, while investor pessimism will increase earnings volatility. Therefore, the outbreak of COVID-19 will have an impact on the economic environment, which will affect investor sentiment, causing stock price changes (He et al., 2020).
The COVID-19 pandemic, a public health emergency, has not only caused infection and death to people but also disrupted the stock market Vietnam is one of the countries responding most effectively to COVID-19 As soon as COVID-19 was reported, the Government convened and promptly adopted blockade regulations to stop the disease's spread As the pandemic spreads, new policies are established. Research on the impact of the COVID-19 pandemic on the Vietnamese economy and the stock market has been widely publicized Specifically, the study of Vo Duc Tam
& Vo Van Ban (2021) and the study of Lai Cao Mai Phuong (2021) However, most studies in Vietnam only study the period before and during the pandemic outbreak,and research activities are only researched for each industry, so there is no general overview of the whole market Different industries are affected by the pandemic to varying degrees, and their ability to respond varies To comprehensively assess the impact of COVID-19 on the stock prices in Vietnam, the author decided to apply theEvent Study method to examine the stock prices of these companies Therefore, the topic " Impact of COVID-19 on Vietnam's stock market " was selected by the author for the thesis.
Research situation related to the thesis content
According to He et al (2020), In the capital market, emergencies often affect investor behavior by affecting investor sentiment, which ultimately affects stock prices The earliest event study proposed by Fama et al (1969) can be used to understand whether market security prices are related to specific events In recent years, event study has been widely used in the field of accounting and financial practice and has gradually become a common research method in business studies.
Up to this point, many domestic and foreign authors have conducted research on the impact of COVID-19 on the stock market In China, He et al (2020) pointed out that the COVID-19 pandemic seriously affected China's traditional industries(transportation, mining, electricity & heating, and the environment), but it creates opportunities for high-tech sectors to develop, such as the manufacturing industry,information technology, education, and healthcare Alam et al (2021) show that, onFebruary 27, 2020, after the announcement of the COVID-19 outbreak in Australia, the food, pharmaceutical, and healthcare industries had an unusual return, which is impressively positive However, 10 days after the announcement of the event, the transportation sector performed poorly, while the telecommunications, pharmaceutical, and healthcare sectors performed well In Vietnam, Lai Cao Mai Phuong (2021a) researched the banking sector index 250 days before each event and has shown that the stock price movements of the banking sector react differently to each event.
However, research studies in Vietnam focus primarily on examining the impact of COVID-19 on each specific industry Studies in Vietnam often do not analyze broadly across all sectors Therefore, this study will continue to inherit,update, and study the impact of the COVID-19 epidemic on the stock prices of companies in the Vietnamese stock market.
Research objectives
The goal of the study was to examine how the COVID-19 pandemic affected the stock values on the Vietnamese stock market On that premise, the author up with some suggestions to assist investors in making more sane investing choices.
• Impact of COVID-19 on Vietnam's stock market.
• Stock prices are reflective of published information related to COVID-19.
• Proposing solutions to assist investors in limiting risks when making stock market investment decisions.
Research questions
Question 1 How does the COVID-19 pandemic affect the Vietnamese stock market? Question 2 How does the stock price reflect the published information related to COVID-19?
Question 3 What recommendations should be given to help investors minimize risks when making investment decisions on the stock market?
Research subject and scopeof study
The COVID-19 pandemic and stock prices of firms listed on the Vietnamese stock exchange.
Regarding space: Share prices of companies in the VN30 index.
Regarding time: The period from September 2019 to April 2021.
Research methods
In this thesis, the author uses the Event Study method The event method uses a measure of the extraordinary returns arising from events Through the value of extraordinary earnings, it is possible to estimate the market's response to changes in stock prices or measure changes in the performance of a business when significant events occur.
An event is defined as an action or phenomenon related to an organization that is made available to the public Events are usually divided into two types: random events (natural disasters, epidemics, wars ) and regular events (business announcements, dividend payments ) In this study, the COVID-19 outbreak was a random event Specifically, three times that the Government announced social distancing information The first time was on March 30, 2020, when the Government issued a directive to implement nationwide social distancing; the second time was on July 28, 2020, when announcing information on implementing social distancing in Da Nang; the third time was on 9 July 2021 when Ho Chi Minh City applies directive 16 These three days were chosen because they showed that the number of COVID-19 cases grew fast and there was infectiousness in the population.
If the COVID-19 outbreak is not contained quickly, it will represent a major threat to public health and have far-reaching implications.
This thesis uses the Event Study method developed by Fama et al (1969).This is the main methodology to examine the reaction of industry price indexes on the Vietnamese stock market in response to social blockade events because of the COVID-19 epidemic As a result, the study will be structured in accordance with the steps and standards of the event study methodology In an event study, the author follows four processes to assess an event's impact:
Step 2: Model how stock prices react to events
Step 3: Calculate abnormal returns and cumulated abnormal returns.
Step 4: Use t-distribution statistics (t-statistics test) to check how the COVID-
19 epidemic in Vietnam affects stock prices The t-statistics were calculated at different time points in each event window.
Thesis structure
LITERATURE REVIEW
Theoretical basis
According to the latest securities law in Vietnam passed on November 26,
2019, Law No 54/2019/QH14 has the following definition: “Securities market refers to a location or method of information exchange for trading securities.” (State Securities Commission of Vietnam, 2019).
According to Teweles & Bradley (1998), the securities market is a term used to refer to the mechanism of long-term trading securities, such as bonds, stocks, and other financial instruments such as investment fund certificates, and derivative instruments such as futures, options, and security certificates The securities market is a long-term capital market, focusing on capital for investment and economic development, thus having a great impact on the investment environment in particular and the economy in general On the other hand, the securities market is an advanced market where many people engage with different purposes, knowledge, and interests; The transactions of financial products are made with great value This attribute makes the securities market an easy environment for improper profit- making activities through fraudulent, unfair practices that cause losses to investors, the market, and the whole economy Starting from the important role as well as the complexity of the securities market, the operation and supervision of the market are essential to ensure effectiveness, fairness, and health It protects the legitimate interests of investors, harmonizes the interests of all market participants, and leverages and maintains the resources for economic development Each market has its market monitoring and operating mechanism that is consistent with its characteristics.
2.1.1.2 The nature of the securities market
According to James (2022) the nature and how the stock market works are:
• Stock markets provide a secure and regulated environment where market participants can transact in shares and other eligible financial instruments with confidence, with zero to low operational risk Operating under the defined rules as stated by the regulator, the stock markets act as primary and secondary markets As a primary market, the stock market allows companies to issue and sell their shares to the public for the first time through the process of an initial public offering (IPO) This activity helps companies raise the necessary capital from investors.
• A company divides itself into several shares and sells some of those shares to the public at a price per share To facilitate this process, a company needs a marketplace where these shares can be sold, and this is achieved by the stock market A listed company may also offer new, additional shares through other offerings at a later stage, such as through rights issues or follow-on offerings They may even buy back or delist their shares.
• Investors will own company shares in the expectation that share value will rise or that they will receive dividend payments or both The stock exchange acts as a facilitator for this capital-raising process and receives a fee for its services from the company and its financial partners Using the stock exchanges, investors can also buy and sell securities they already own in what is called the secondary market.
Stocks are securities, issued in the form of certificates, or journal entries, confirming the legitimate rights and interests of investors when jointly participating in the business and production activities of enterprises When investors (also known as shareholders) contribute money to a business, they will receive a certificate for the contributed amount and become the owner of that business.
• Used to determine shareholder ownership Owners of stock have the authority to direct, oversee, attend board meetings, and cast votes on crucial matters affecting the corporation.
• Shares generally do not have a maturity date because they are not a liability to the company Shareholders are entitled to dividends depending on the business performance of the enterprise, and are also the risk bearers (the company encounters) in proportion to the capital spent and are divided the remaining asset value when liquidating the company (after the time of paying debts and giving preference to shareholders)
• Common shareholders are not entitled to withdraw capital from the company but must transfer ownership in the form of resale, gift or inheritance.
• Market value is also known as market price, expressed in the last transaction that was recorded In fact, the market price of shares is not set by the company or anyone else, but the market price is determined by the buyers and sellers in the market.
• Par value for a share refers to the stock value stated in the corporate charter.Shares usually have no par value or very low par value, such as one cent per share In the case of equity, the par value has very little relation to the shares' market price The par value of a share has no real value to investors who have invested, so it does not affect the market price of that share The par value of the shares is only significant when the company issues a share for the first time to raise capital at its inception Par value represents the minimum amount the company receives per share it issues.
• Book value is equal to the cost of carrying an asset on a company's balance sheet, and firms calculate it by netting the asset against its accumulated depreciation As a result, book value can also be thought of as the net asset value (NAV) of a company, calculated as its total assets minus intangible assets (patents, goodwill) and liabilities For the initial outlay of an investment, book value may be net or gross of expenses such as trading costs, sales taxes, service charges, and so on The formula for calculating book value per share is the total common stockholders' equity less the preferred stock, divided by the number of common shares of the company.
• Intrinsic value is a measure of what an asset is worth This measure is arrived at by means of an objective calculation or complex financial model Intrinsic value is different from the current market price of an asset However,comparing it to the current price can give investors an idea of whether the asset is undervalued or overvalued The financial analysis uses cash flow to determine the intrinsic, or underlying, value of a company or stock In options pricing, intrinsic value is the difference between the strike price of the option and the current market price of the underlying asset.
Related theories
Theories that explain the market’s reaction to rare events (e.g., the COVID-
19 pandemic) include: The theory of the efficient market, the theory of behavioral finance and the random walk theory of stock prices.
An efficient market is one in which the market value of a stock reflects all information available in the market at the time and it is not possible for the public to conduct arbitrage based on that information The efficient market hypothesis (EMH) maintains that all stocks are perfectly priced according to their inherent investment properties, the knowledge of which all market participants possess equally (Downey,
2022) It is common to distinguish among three versions of the EMH: the weak,semistrong, and strong forms of the hypothesis These versions differ by their notions of what is meant by the term “all available information.”
According to Bodie et al (2018), in the 11th edition of the book
"Investment," the versions of the efficient market hypothesis are presented as follows:
• The weak-form hypothesis asserts that stock prices already reflect all information that can be derived by examining market trading data such as the history of past prices, trading volume, or short interest This version of the hypothesis implies that trend analysis is fruitless Past stock price data are publicly available and virtually costless to obtain The weak-form hypothesis holds that if such data ever conveyed reliable signals about future performance, all investors already would have learned to exploit the signals. Ultimately, the signals lose their value as they become widely known because a buy signal, for instance, would result in an immediate price increase.
• The semistrong-form hypothesis states that all publicly available information regarding the prospects of a firm must be reflected already in the stock price. Such information includes, in addition to past prices, fundamental data on the firm’s product line, quality of management, balance sheet composition, patents held, earnings forecasts, and accounting practices Again, if investors have access to such information from publicly available sources, one would expect it to be reflected in stock prices.
• The strong-form version of the efficient market hypothesis states that stock prices reflect all information relevant to the firm, even including information available only to company insiders This version of the hypothesis is quite extreme Few would argue with the proposition that corporate officers have access to pertinent information long enough before public release to enable them to profit from trading on that information.
2.2.2 The theory of behavioral finance
Aside from the basic value of stocks, behavioral finance theory predicts that emergencies will have an impact on investors' psychological and behavioral factors, which will have a significant impact on stock prices.
According to Tversky & Kahneman (1974), investor behavior is approached based on the following factors: (i) Experience, which is based on typical situations, availability, or reference information; (ii) Behavioral deviations due to ignorance; (iii) Investment based on experience, emotions, and social interaction; (iii) Crowd psychology, which is based on imitating the actions of other investors or following market movements rather than relying on their sources of information and investment strategies Behavioral finance studies show that investor sentiment changes based on the information they receive, which in turn can influence investor decisions and behavior, which in turn impacts stock prices.
Lee and Jiang (2002) believe that investor optimism will reduce earnings volatility, while investor pessimism will increase earnings volatility Therefore, the outbreak of COVID-19 will have an impact on the economic environment, which will affect investor sentiment and cause stock price changes.
2.2.3 The random walk theory of stock prices
Smith (2020) in an article on “Random walk theory: Definition, how it is used, and examples” talked about the definitions of random walk The random walk theory suggests that changes in stock prices have the same distribution and are independent of each other Therefore, it is assumed that the past movement or trend of a stock price or market cannot be used to predict its future movement In short, the random walk theory proclaims that stocks take a random and unpredictable path that makes all methods of predicting stock prices futile in the long run The random walk theory believes it's impossible to outperform the market without assuming additional risk It considers technical analysis undependable because chartists only buy or sell a security after an established trend has developed Likewise, the theory finds fundamental analysis undependable due to the often-poor quality of information collected and its ability to be misinterpreted Critics of the theory contend that stocks do maintain price trends over time – in other words, it is possible to outperform the market by carefully selecting an entry and exit points for equity investments.
RESEARCH MODEL
RESEARCH DATA
Overview of the impact of the COVID-19 pandemic on the international
In January 2020, COVID-19 was brought to the world’s attention The accelerating spread of the virus and the growing number of reported cases prompted the Chinese Government to move quickly On January 23, 2020, the entire city of Wuhan was put under lockdown, shocking the world and later proving to be a highly powerful strategic move by the Chinese Government The WHO called the epidemic in China a global health emergency of international significance a week later There were 7,711 reported cases at the time, with 83 cases in 18 countries outside China. The crisis began to affect the global economy.
As many countries adopt strict quarantine policies to fight the unseen pandemic, their economic activities are suddenly shut down Transports being limited and even restricted among countries have slowed down global economic activities. Most importantly, consumers and firms have prevented their usual consumption patterns due to the creation of panic among them and created market abnormality. Uncertainty and risk created due to this pandemic, causing significant economic impact all over the globe affecting both advanced and emerging economies such as the United States, Spain, Italy, Brazil, and India In this context, the financial market has responded with dramatic movement and adversely affected Economic turmoil associated with COVID-19 has affected the financial market severely which includes both stock and bond markets Due to this pandemic, there is a large fall in the price of oil and a large increase in the price of gold Firzli
(2020), refers to this pandemic as “the greater financial crisis.” In many countries,businesses are highly indebted, weak companies are further destabilized, and corporate debt stands at a very high level The global financial market risk has of this pandemic, the global stock market has struck out about USD $6 trillion in 1 week from 24 to 28 February The market value of Standard & poor (S&P) 500 indexes declined to 30% since the COVID-19 outbreak (Bora & Basistha, 2021)
In Europe, the Financial Times Stock Exchange 100 index witnessed a sharp 1-day fall since 1987 United Kingdom's leading index FTSE has fallen more than 10% on March 12, 2020, (Zhang et al., 2020) The leading economy of the world, the
US stock market hit the circuit breaker mechanism four times in 10days in March
2020 Vishnoi and Mookerjee (2020) observed that the stock market in Japan had dropped more than 20% in December 2019 The stock market of Spain, Hong Kong, and China also declined to 25.1%, 14.75%, and 12.1% in their price from March 8,
2020, to March 18, 2020 The top leading emerging economies such as Brazil,Russia, and Mexico gradually moved toward hard mobility restrictions that will bring down the emerging economies to a recession of 1% in 2020 In South Korea, theCoronavirus disease caused Korea Composite Stock Price Index (KOSPI) to drop below 1,600 in their history after 10 years (Bora & Basistha, 2021)
Overview of the impact of the COVID-19 pandemic on Vietnam's stock
Vietnam is currently one of the most dynamic emerging countries in the world with a rapidly growing economy and stock market (The World Bank, 2020) The stock market of Vietnam is made up of two principal stock exchanges: the Ho Chi Minh Stock Exchange (HOSE) listing companies with charter capital above VND
120 billion and the Hanoi Stock Exchange (HNX), listing companies with above VND 30 billion The number of listed companies increased from 5 in 2000 to
743 in 2019 The stock market of Vietnam has turned from a frontier market into an emerging market Market capitalization increased by almost three times during the2014-2019 period, from USD 52.43 billion to USD 149.82 billion (The World Bank,2020) the world in unprecedented ways The Vietnamese stock market is no exception The global COVID-19 pandemic also enormously affected the Vietnam stock market like what happened during the 2008 global financial crisis that caused the Vietnam market index (VN-index) to fall sharply Prices of almost stocks on the Vietnam securities market plummeted in the first three months of 2020 At the trading session on 30 March 2020, the VN-Index had declined by 28% compared with 31 December
2019, resulting in a loss of USD 37.4 billion (over 15% of GDP in 2019) of the Vietnam stock market capitalization (Dao Van Hung et al., 2021).
The first time: On March 30, 2020, the Government issued a directive to implement nationwide social distancing
After detecting the first COVID-19 patient in Hanoi, patient number 17 returned from Europe on March 6, 2020 Vietnam's COVID-19 prevention and control measures have been quickly implemented with the coordination of many ministries and branches from the central to local levels, and each individual. Residents are required to wear masks in public places; business establishments and entertainment services (bars, cinemas, massages) have ceased operations, the issuance of visas for foreign visitors is suspended for 30 days; they require all foreigners entering Vietnam to quarantine for 14 days, closing borders to all foreigners (only accepting Vietnamese citizens), mandatory medical clearance for all domestic passengers (airplanes, trains, buses), banning gatherings of more than 20 people After recording the 200th patient infected with COVID-19 on March 30,
2020, Vietnam announced the epidemic nationwide a day after the country was locked down (Open Development Vietnam, 2020)
The second time: On July 28, 2020, announced the implementation of social isolation in Da Nang
After 100 days without community transmission, on July 26, 2020, Vietnam recorded patient number 416 infected with COVID-19 in Da Nang As of July 28,
11, 2020, Da Nang had returned to a normal rhythm of life, removing quarantine after
14 days of no new cases And then on September 15, 2020, Vietnam officially restored six international routes (Open Development Vietnam, 2020)
The third time: On July 9, 2021, Ho Chi Minh City applied directive 16
After recording the first case at the Phuc Hung mission group in Go Vap district Ho Chi Minh City has discovered the largest chain of infections Detecting two outbreaks and conducting extensive testing throughout the city to take about 50,000 samples/day Until July 9, 2020, Ho Chi Minh City implements social distancing according to Directive No 16 of the Prime Minister for the first time. Establishment of a Command for the Prevention and Control of COVID-19; SARS- CoV-2 Testing Coordination Center; Coordination center for organizing vaccination against COVID-19 (Open Development Vietnam, 2020)
With no deaths reported and no more cases of community transmission, theVietnamese government declared victory over the disease outbreak Since then, theVietnam stock market has started to show recovery signs According to Bloomberg,Vietnam was the best performer in the global and Asian stock markets in April andMay 2020, respectively.
RESEARCH RESULTS
Research results
From the collected data, calculate the first data in turn: the profit of each stock in VN30 and the general index of the VN-Index market Then expected return (ER), abnormal return (AR), and cumulative abnormal return (CAR) will be calculated in MS Excel After the results of AR and CAR in all three events The next step is to check the significance level t of both abnormal return and cumulative abnormal return To check whether abnormal return and cumulative abnormal return are statistically significant, the author will test using a One-Sample t-test on SPSS.
Figures 5.1, 5.2, and 5.3 show the cumulative abnormal return (CAR) findings for Events 1, 2, and 3, respectively.
Figure 5.1: The cumulative abnormal return (CAR) findings for Event 1
Figure 5.1 shows that the cumulative abnormal return before the event date dropped sharply, nearing the event date of March 30, 2020, it reversed but was still less than 0 Accordingly, after the event date, the CAR continued to decrease It shows the stock market's stock price trend is down.
Figure 5.2 shows a positive stock price movement after July 28, 2020 It shows that the market price trend is up when Event 2 occurs This is the only event that the stock price has a positive reaction to in the three events studied This can be explained by the fact that this is the second blockade, and unlike the previous blockade, this blockade only took place in Da Nang, not across the country. Although Da Nang is one of the places that attract the most tourists, it is still not the
EVENT 2_28/07/2020 investors could have anticipated this news and not reacted negatively. shows a similar response, the cumulative abnormal return after 9 July 2021 is negative.
Like figure 5.1, figure 5.3 also three different events Table 5.2 presents the results and the t-test for cumulative abnormal return (CAR) [-t; 0) and (0; +t] around events related to the COVID-19 outbreak.
Table 5.1: Abnormal returns (AR) and t -test results for three lockdown times due to COVID-19 in Vietnam 1 t 30/03/2020 28/07/2020 09/07/2021
AR t -test AR t -test AR t -test
Note: *, ** and *** have statistical significance of 10%, 5% and 1%, respectively.
Discuss the results
CAR t -test CAR t -test CAR t -test
Note: *, ** and *** have statistical significance of 10%, 5% and 1%, respectively.
5.2.1 The first event: On March 30, 2020
After the Chinese press reported on the first cases of COVID-19 fromWuhan, the Vietnamese Government, ministries, and branches, urgently implemented prevention activities such as restricting movement through a blockade.Businesses and entertainment services will be closed, and masks will be required in public places Borders are officially closed to all foreigners and remain open to announced the COVID-19 epidemic nationwide and that the whole country implemented social distancing on April 1, 2020.
Table 5.1 shows the drop in stock prices before the Prime Minister announced the nationwide COVID-19 epidemic Abnormal returns on AR (-3) = - 1%, AR (-2) = -1.8%, AR (-1) = -1.4% and both have statistical significance of 5%.
On the event day, AR (0) = 0.4% is positive but not statistically significant Table 5.2 shows that a few days before the event of cumulative abnormal return are less than zero and have statistically significant Specifically, in table 2, CAR [-5;0) = - 2.8%, CAR [-4;0) = -3.5%, CAR [-3;0) = -4.2%, CAR [-2;0) = -3.2% Abnormal return and cumulative abnormal return before the event date are both negative and statistically significant However, after the event date, both abnormal return and cumulative abnormal return of stocks in the VN30 index were insignificant.
In Event 1, after the event date, abnormal return is not statistically significant, while cumulative abnormal return is negative and has only 10% statistical significance at CAR (0;7] = -2.7% Accumulated abnormal profit and abnormal profit did not have statistical significance at the date of Vietnam's national epidemic announcement showing that investors do not overreact after the information is released That is, investors have predicted the information that will happen and have acted before This is reflected in the fact that the stock price in Vietnam's stock market has had a significant decrease of about 650 points, corresponding to a decrease of 32% since the beginning of 2020 The reason for the appearance of negative abnormal profits is after a citizen with COVID-19 returned from the United Kingdom From March 17, 2020, to March 29, 2020, Vietnam quickly introduced a series of measures to limit the entry of COVID-19 from abroad, as well as measures to limit the infection in the country Besides, the negative information about a series
After announcing the implementation of isolation in Da Nang, one of the places with the highest number of tourists in Vietnam The abnormal return before the event date is negative, t = -7, t = -6, t = -5, t = -4, t = -2, t= -1 In which the largest negative abnormal return is the days AR (-6) = -2%, AR (-2) = -3.3%, AR (-
1) = -5.6% and are statistically significant at 1% level Similarly, the cumulative abnormal return before the event is both negative and statistically significant at the 1% level At the event date AR (0) = 2.7% with 1% significance level After the event day, abnormal returns appeared positive from day two and were all statistically significant In which, the largest abnormal return (AR) is AR (2) = 2.1%, AR (4) 4%, AR (5) = 2%, AR (6) = 1.6% and are all statistically significant at the 1% level. Just like before Event 2, the closer to the event, the larger the abnormal return and the more statistically significant The cumulative abnormal return after the event also showed a positive trend with the abnormal return being positive and statistically significant Both the abnormal return and the cumulative abnormal return during the event were statistically significant before and after the date of the event It shows how the stock price reacted immediately to the event The reaction before and after the day of the event was the opposite The increase in stock price after the announcement of Event 2 is explained by the following reasons: Firstly, cities that were once well-liked tourist attractions for visitors from abroad were expected to suffer because of COVID-19 In Vietnam and around the world, Da Nang is regarded as one of the most popular tourist destinations The tourism sector has been negatively impacted by the spread of COVID-19 throughout the world, and Da Nang is no exception These negative effects have been received by investors through the media since the COVID-19 epidemic in Vietnam in March, so when Da Nang announced its blockage at the end of July, which was not too surprising for blockade beginning on July 28, 2020, focused exclusively on six districts of Da Nang, is far lower than the nationwide lockdown beginning on March
30, 2020 Finally, investors in Da Nang are more experienced and relaxed with limiting information than they were previously.
The result of the second event is like the study of Alam et al (2020) as the market reacts positively to positive abnormal returns after the event date While in the pre-lockdown period, investors panicked and it was reflected in the negative AR. Similar to Lai Cao Mai Phuong (2021a) study on the reaction of banking stock prices after the event date is 2 July 28, 2020.
5.2.3 The third event: On July 9, 2021
After recording the first case of COVID-19 at the Phuc Hung mission group in Go Vap district Ho Chi Minh City has conducted large-scale COVID-19 testing. Until July 9, 2021, Ho Chi Minh City implemented social distancing according to directive No 16 of the Prime Minister for the first time Before the date of the third event, abnormal returns appear and are statistically significant at specific dates AR (-
6) = 0.7%, AR (-3) = -4.5%, AR (-2) = 1.7%, AR (-1) = -1% There are both positives and negatives On the third event day, the abnormal return was negative
AR = -2.3% and statistically significant After the event date, the abnormal return is negative and statistically significant As for the cumulative abnormal return before and after the event are negative.
Abnormal return and cumulative abnormal return are negative and statistically significant a few days before the event and after the event, indicating that investors react negatively to the news The negative reaction of stock prices before and after the event occurs is explained by two main reasons Firstly, this is the fourth COVID-19 outbreak that has affected Vietnam Unlike previous waves of complicated developments across the country, making investors worried about the economic prospects in the second half of the year Secondly, the expected factors in the third quarter of 2021 become worse when business results may decline. Meanwhile, most of the positive business results in the first half of the year have been announced, so the market has little room for growth and cash flow becomes more conservative The pandemic makes the macroeconomic outlook less optimistic. Many reputable organizations such as the World Bank, ADB, and Standard Chartered forecast Vietnam's economic growth in 2021 from 5.5 to 6.2%, much lower than the previous forecast Moreover, the banking group - accounting for the largest proportion in VN30 - has begun to be negatively affected when customers, especially in the service sector, are in a much more difficult situation than in 2020. Facing such unfavorable information, confidence in the market's growth trend was no longer strong This leads to a drop in stock prices before and after the event date.
CONCLUSIONS ANDRECOMMENDATIONS
Conclusions
To examine the impact of the COVID-19 epidemic on stock prices on the Vietnamese stock market, this article uses three different events related to the evolution of the COVID-19 epidemic in Vietnam in 2020 based on the research sample of the stocks in the VN30 index.
The three facts used in this thesis are: (i) On March 30, 2020: Vietnam announced a nationwide outbreak of COVID-19; (ii) July 28, 2020: Announcement of information on implementing social distancing in Da Nang; (iii) On July 9, 2021:
Ho Chi Minh City applied directive 16 Using the t-test method, this thesis has demonstrated that investors react differently, through the share prices of listed companies, to three COVID-19 events in Vietnam in 2020 and 2021 Investors are sensitive to information about unexpected events that have never happened before. Therefore, the unusual return before March 30, 2020, when the Government announced the nationwide implementation of the distance, continuously changed the signal The abnormal returns of stocks AR (-15), AR (-12), AR (-7), AR (-6) are positive, approaching the date of events AR (-3), AR (-2), AR (-1) is negative In this first event, perhaps investors anticipated the impact of the event and reacted before the event was announced The difference in the second event is that investors responded positively to Da Nang's implementation of the six-district lockdown in the city since July 28, 2020 When abnormal return and abnormal cumulative return after the event date are positive and both are statistically significant Investors may think that the profit results of businesses in the third quarter are positive and the lockdown in Da Nang was much smaller than the first lockdown event across Vietnam at the end of March 2020 At the third event, when Ho Chi Minh City, one of the country's key economies accounting for 22% of the country's GDP, announced has shown that stock prices tend to decrease in the first and third events and tend to increase in the second event.
This study contributes to the previous literature on the impact of the epidemic on the stock prices of companies listed on the Vietnamese stock market, the sample selected for the research stocks in the VN30 index It considered the full impact of all three events related to the impact of the COVID-19 epidemic in 2020 and 2021 in Vietnam on the stock market An important market for the nation's businesses and economy It also clarifies the timely responses and decisions of Vietnamese leaders to achieve the dual goal of both fighting the COVID-19 pandemic and supporting businesses to recover soon after the pandemic.
Recommendations
In the face of the undeniable adverse effects of the COVID-19 pandemic, it has also caused significant impacts on the business activities of businesses as well as the entire economy Meanwhile, during the outbreak of COVID-19 in Vietnam, the number of investors opening new securities accounts increased at a record speed The main reason comes from the Government's social blockade policy, causing the real estate market to freeze, banks cutting interest rates to support businesses in difficulty due to COVID-19, causing savings interest rates to decrease This has led to massive cash flow being pushed into the stock market And the stock market has appeared many new investors New individual investors (F0) are mainly amateurs, so even though they participate in large numbers, they have a lower degree of portfolio diversification, and a smaller trading size and volume compared to other institutional investors Individual investors often do not have a long-term investment strategy and do not follow specific investment philosophies Therefore, based on research results on the impact of COVID-19 on Vietnam's stock market, this study offers some implications for investors.
Firstly, during the COVID-19 pandemic, some businesses have a high risk of enterprises before making investment decisions to avoid making wrong decisions when investing in businesses that are not good or have no growth potential.
Secondly, before each investment decision, investors need to update information, especially information that is likely to have a strong impact on the economy and the stock market (such as the evolution of the COVID-19 epidemic), to analyze and have a timely response strategy Investors need to pay close attention to quickly check official information and its developments Keeping up to date with current events along with correct information handling in the market is essential. This will help investors seize investment opportunities to gain profits or minimize losses.
Thirdly, investors when investing in the stock market during this period.Especially for new investors (F0), need to be very careful with misleading information to preserve profit margins and minimize investment risks.
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30 firms that were in the VN30 basket at the time of the research
Number Stock Free-Float (%) Number of shares outstanding (share)
AR t -test AR t -test AR t -test
CAR t -test CAR t -test CA
Results of the first event t -test t 30/03/2020
AR t -test Sig (2-tailed) Hypothesis testing
0,003 -0,848 0,404 Do not reject H0 t AR t -test Sig (2-tailed) Hypothesis testing
0,014 -6,775*** 0,000 Reject H0 t AR t -test Sig (2-tailed) Hypothesis testing
CAR t -test Sig (2-tailed) Hypothesis testing
R t -test Sig (2-tailed) Hypothesis testing