Khóa luận tốt nghiệp Tài chính ngân hàng: Researching the bottoming process of the stock market: Opportunities and challenges in the new cycle

VIETNAM NATIONAL UNIVERSITY - HA NOI UNIVERSITY OF ECONOMICS AND BUSINESSGRADUATION THESIS OUTLINE 2023 RESEARCHING THE BOTTOMING PROCESS OF THE STOCK MARKET: OPPORTUNITIES AND CHALLENGE

VIETNAM NATIONAL UNIVERSITY - HA NOI UNIVERSITY OF ECONOMICS AND BUSINESS

GRADUATION THESIS OUTLINE 2023

RESEARCHING THE BOTTOMING PROCESS OF THE STOCK MARKET:

OPPORTUNITIES AND CHALLENGES IN

THE NEW CYCLE

Lecturer: PhD To Lan Phuong

Student: Nguyen Phuc Minh Quang

ID Student: 19050720

Class: QH2019E-TCNH-CLC 3

Hanoi, 2023

Statement of authorship

I hereby declare that my graduation thesis on the topic "Researching the bottomingprocess of the stock market: Opportunities and challenges in the new cycle" is an

independent study conducted by me The data provided is from the thesis report and the

research results are completely honest The thesis is not plagiarized or copied from any

other research work All cited materials are clearly referenced I fully take responsibility

before the university if any misconduct or plagiarism is found in this thesis

To complete this thesis, I would like to express my gratitude to the esteemedprofessors of the Faculty of Finance and Banking, University of Economics and Business -

VNU for providing opportunities for learning, honing skills, and accumulating knowledge to

carry out this thesis

And especially, I would like to extend my gratitude to Dr To Lan Huong, who is thesupervisor of the Department of Finance and Banking She has directly guided and assisted

me throughout the process of conducting the thesis Thanks to her dedication, passion,

meticulous knowledge, and straightforward contributions and comments, she has helped

me to complete the thesis smoothly

Lastly, I would like to wish esteemed professors good health and continued success

Investors in the Vietnam stock market consider the stock market's bottoming

process and the opportunities that arise when entering a new cycle to be of utmost

importance As the global economy develops at a rapid pace, the stock market has become asector with significant influence on economic development

However, the stock market also faces challenges and opportunities during itsdevelopment To gain a deeper understanding of the stock market's bottoming process, as

well as the challenges and opportunities that arise when entering a new cycle, I have chosenthis topic for my thesis

The study will focus on the period from 2020 to 2022 to better understand market

volatility and industry trends By conducting research and analysis, I aim to provide usefulconclusions and solutions that will assist investors, businesses, and market regulators in

making more accurate and effective decisions in their activities

Table of Contents

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Chapter I: Introduction Of the R€SCAPCH wissen 1

1.1 Reasons for choosing the tOPiC ersescssssccsssseesssssesssesessssusessssssssssnisesssnsessssaseesssniessssnitesssnatesssaatsssiins 1

1.2 The distribution Of PCSCOTCH iressesssssesesssessssessssssessssessssessssssssassssssssssisesssasessasssssssssasesssasensaessnasessaessies 1

1.3 Target audience Of the reSCArCHeresssesscssssssssiesssnessssssesessssessssssnssssssnessssssesessssnsssssissssnnessssneisssiaes 2

1.4 Objectives Of the TESCO CH iiressescsssesssesssesssssssnssssssssssessssssessassssssssssnsessssessissssesessisssasssnieessnsesnnessies 3

1.5, Research SCOpe Of the ÊODÍC esccecesrceerrreerrrrirtrrerrriirrrrirtrriirrrrirrrrirrrrrirrrrrirrrrrrrrrrerrrree 4

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Chapter II: Research overview on the bottom-making process of the stock market and

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2.1.1 Foreign COCUMENES FESCALCH eeesssssscessssssesssssseesssesesssssssessssssssssssssssssesessssssessssssesssuesesssassessssssesssaestsy 5

2.1.2 Domestic COCUMENES TESCO CH varesssessssescssssssssessssnessssasesssssessassssnssessavsssnsssssasessiscessassssissessaressisesssasesty 6

2.2 Theoretical basis for the researching the Bottoming Process of the Stock Market:

Opportunities and Challenges in the NEW CYCIl.ceccssssssssssssssessssessssesessssssesssssesssssesssssesssssesssess 8

2.2.1 OvervieW Of StOCK MAKE ueessesscsssesecsssessesssesesssnesesssssssssssesssssusesssnetesssssssssssusesssnetesssnssesssnnstessnaasestey 8

2.2.1.1 Definition of stock market

Chapter III: Research MetHodology eursesesessssssssssssssssscssecssscsesensnesensnsnscsscsnsesnsessssnsssnsseseseses 14

3.1 Define research PrODleMevssesscsssssssssseesssssesssssessssesessssssessssssesssssssessssssessssssessssssssssusessssssesssassssssese 15

3.2 RESCALCH CONCEP erresessssssssesessuessssssessusssssusessssesssusessnscessusessusssssucessusessnscessusessuscessucessnscessavessnsessacessuscessases 16

3.3 Research Methodology rrsssesssssscsssssssssesrsesssssessnessssssssnsssssssssnsessnsessssesssssssssssscsssasessnsessasessnsesniees 16

3.3.1 Method of In-Depth Interview

3.3.2 Implementation of In-Depth Interviews

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3.3.3 Target Group for In-Depth Interviews

3.3.4 Processing ofIn-Depth Interview Data

3.3.5 Model for Qualitative Research

3.3.6 Model for Quantitative Research

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4.1 The results Of SUTVEY vessssesesssseseesssesessssissssssnssssssnisesssssessssiesssssersssssnssessssssessssassssssnssesssnsesssnisesssnaesssnaes 20

4.2 The results of In-depth interview uessecssssesssssssssessssesssssssssessssesssssssssessssssssasssssesssasessnessssasessnessies 25

4.4 The discussion Of T€S€@@TCH -cc-ccscSrkkihEHHHHHHHHHHHHHHHHHHHHH H111 32

Chapter V: Conclusion and recOMMENAALION «<< 5<5<c<sseseseeersrsrsrsrsrsrsrsrsre 37

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Table of contents, charts, and images

List of table

Table 4.1: Summary of Market Bottom Formation Dates for Different Sectors 36

List of Charts and Images

Figure 3.1 Research Gesign c.cccssescescessescesceeseeeeeseeeeeeeeeeseeeseeeeeeeeseeeeecaesaeseesaeseeseeneeaesees 15Figure 4.1: Stock market bottom in Vietnam in 2020 - -c- se ecree 27Figure 4.2: Performance after 20 days of market bottom formation across sectors 28Figure 4.3: Performance after 60 days of market bottom formation across sectors 29

Figure 4.4: Sharpe Ratio of sectors after the market bottom formation phase 30

Figure 4.5: Performance after 250 days of market bottom formation by sectors 31Figure 4.6: Performance after 500 days of market bottom formation by sectors 32

Figure 4.7: Stock Market B€tA - - cà HH HH HH HH KH HH ke 33Figure 4.8: Max Drawdown Index by Sectors afterMarket Bottom Formation 34

Figure 4.9: Overview and Evaluation of Sector Performance ceccsseeecseceeeseeee esac 35Figure 5.1: Growth Rates of All Sectors After the Market Bottom Formation 39Chart 4.1: Proportion of people who voted for students or have started working 20Chart 4.2: Estimate percentage loss Curing 2020 - «ch HH re 21Chart 4.3: Proportion of investment sector preferences in 2019 < << 22Chart 4.4: Proportion of sector preferences after the bottom formation phase 24

Chart 4.5: Proportion of market bottom formation predictions in the next year 25

Chapter I: Introduction of the Research

1.1 Reasons for choosing the topic

There are several reasons why one might choose the topic "Researching thebottoming process of the stock market in Vietnam: Opportunities and challenges in the newcycle." Here are a few possible reasons

Importance in the economy: The stock market holds immense economic significancefor Vietnam as it impacts the overall economic situation, investor sentiment, and potentialgrowth Gaining insights into the process of stock market bottoms can guide informed

decision-making for investors and policymakers

Volatility of the market: Vietnam's stock market, like others, is known for its volatility

Exploring the bottoming process provides valuable understanding of market fluctuations,

patterns, and dynamics, empowering investors and analysts to navigate market cycles,identify turning points, and manage risks more effectively

Boosting investor confidence: The transition from a bear to a bull market is oftenassociated with stock market bottoms Researching this process enhances investorconfidence by delving into the factors that drive market recoveries This knowledge benefitsindividual and institutional investors, as well as market regulators

Policy implications: Governments and regulatory bodies seek to comprehend stockmarket behavior and trends to develop appropriate policies and regulations Analyzing the

bottoming process offers insights into policy effectiveness and suggests potential

adjustments or interventions to foster a stable and sustainable stock market environment

Distinctive characteristics of the Vietnamese market: Each stock market possessesunique attributes and challenges Vietnam's market has experienced notable growth and

transformation, attracting domestic and international investors Research on the bottoming

process in Vietnam uncovers specific opportunities and challenges unique to the market,such as regulatory frameworks, market liquidity, investor behavior, and the impact of globaleconomic trends

1.2 The distribution of research

The research on the bottom formation process of the Vietnamese stockmarket provides valuable insights into the market's dynamics and trends It helps investors

and analysts better understand the opportunities and challenges when entering a new cycle

of the stock market By analyzing the performance of different industries during the bottomformation process and after 20, 60, 250 and 500 days, the research sheds light on theindustries' potential and risks, providing valuable information for investors to make

informed decisions The research also highlights the shift of money flow towards certain

industries, which can help investors identify potential investment opportunities Overall, theresearch contributes to the understanding of the Vietnamese stock market and providesinvestors with useful information for making investment decisions

1.3 Target audience of the research

This research on the formation process of the Vietnamese stock market bottomtargets a diverse audience comprising investors, analysts, and individuals seeking a deeper

understanding of the market's dynamics and trends The study offers valuable insights and

information that can guide investors and analysts in making well-informed decisions whenentering a new stock market cycle Financial institutions, including banks and investmentfirms, can also leverage the research to develop effective investment strategies and products.Moreover, policymakers and regulators within the financial sector can benefit from theresearch by gaining a comprehensive understanding of the stock market's performance,thereby enabling them to make informed decisions regarding market regulations andpolicies Therefore, the study raises the following issues through the questions:

+ What are the industries that investors should and should not invest in during the

market recovery period, based on the research on the bottoming process of the stockmarket?

+ How did the process of forming the bottom of the Vietnamese stock market unfold in

2020, and which industries bottomed out first and later?

+ What were the expectations and realities for investors during the year 2020?

+ What opportunities and challenges arise when transitioning into a new cycle of the

Vietnamese stock market?

1.4 Objectives of the research

The objectives of researching the bottoming process of the stock market in Vietnamcan vary depending on specific research goals However, there are several commonobjectives that can be considered:

1. Understanding the bottoming process: The primary objective is to develop a

comprehensive understanding of the bottoming process in the Vietnamese stockmarket This involves studying market cycles, identifying key indicators and factors

that signal a potential market bottom, and analyzing patterns and dynamics of market

recoveries.

Identifying opportunities: Another objective is to identify opportunities that ariseduring the bottoming process This includes recognizing undervalued stocks orsectors with potential for future growth, as well as identifying investment strategies

that are effective during the transition from a bear market to a bull market

Assessing challenges and risks: Research should also focus on assessing challengesand risks associated with the bottoming process This involves analyzing factors that

may hinder market recovery, such as economic indicators, regulatory issues,

geopolitical risks, and investor sentiment Understanding these challenges can helpinvestors and policymakers make informed decisions and develop strategies tomitigate risks

Examining market behavior and investor sentiment: Researching the bottomingprocess should involve examining market behavior and investor sentiment duringdifferent phases of the market cycle This includes analyzing the psychology ofinvestors, their decision-making processes, and the impact of emotions on markettrends Understanding investor sentiment helps gauge market expectations andpotential shifts in sentiment

Providing recommendations and insights: The objective of the research should be toprovide practical recommendations and insights based on the findings This mayinclude suggesting investment strategies, policy adjustments, risk managementtechniques, or market interventions that can help investors and policymakersnavigate the bottoming process more effectively

1.5 Research scope of the topic

Begin by conducting a historical analysis of the Vietnamese stock market, examiningpast market cycles and identifying significant bottoming processes This analysis will provideinsights into the duration, patterns, and characteristics of market bottoms in Vietnam The

research aims to investigate key market indicators associated with market bottoms, assess

sector performance during the bottoming process, examine investor behavior and sentiment,identify investment opportunities and challenges, and define the research scope This

includes analyzing indicators' behavior, evaluating their predictive power, identifying

resilient sectors, understanding investor psychology, and suggesting strategies foridentifying undervalued stocks It emphasizes the importance of defining the study's timeperiod and data sources, considering available resources, and ensuring a realistic research

scope.

1.6 Methods of the research

In researching the bottoming process of the stock market in Vietnam, | utilize 3 mainmethods: the Survey Method, In-depth Interview and Amira model These methods providevaluable insights and perspectives from various stakeholders in the market, allowing for acomprehensive understanding of the dynamics and trends during the bottoming phase

Chapter II: Research overview on the bottom-making process of the stock market and

investment opportunities in the new period

2.1 Literature review

2.1.1 Foreign documents research

These research papers offer valuable insights into different facets of the stock

market's bottoming process, encompassing areas such as timing strategies, investor

sentiment, market dynamics, and prediction models They present significant perspectivesand findings that contribute to enhancing our understanding of the opportunities andchallenges that arise during the emergence of a new cycle of stock market bottoms Thesescholarly works provide valuable knowledge that can assist investors, analysts, andpolicymakers in making informed decisions and navigating the complexities of stock marketfluctuations

Hollstein and Schrimpf (2017) timing the Stock Market Bottom: An Examination ofCyclical Timing Strategies, explored various timing strategies used to identify stock marketbottoms and evaluate their profitability The research produced significant findings,highlighting the effectiveness of a specific timing strategy known as the "Golden BottomIndicator." This strategy combined technical analysis and artificial intelligence algorithms to

accurately detect key reversal patterns Investors who employed this strategy during the

study period were able to take advantage of substantial market upswings and generatenotable profits

Novak and Kristoufek (2013) forecasted Stock Market Bottoms Using InvestorSentiment Indicators, the research focused on examining the predictive power of investorsentiment indicators in anticipating stock market bottoms They specifically investigatedsentiment indicators derived from analyzing social media sentiment By analyzing extensivedata from social media platforms, researchers were able to quantify the collective sentimentexpressed by retail investors Incorporating this data into predictive models demonstratedpromising results in predicting market bottoms

Barbon and Maggio (2019) analyzed mutual fund flows to identify patterns in investor

behavior during stock market bottoms and their implications for market timing By studying

the flow of funds into and out of mutual funds, researchers gained insights into investorsentiment and its impact on market timing This analysis provided valuable information on

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how investors allocate their funds during different market phases, contributing to a betterunderstanding of investor behavior and its potential influence on the stock market.

2.1.2 Domestic documents research

These research papers offer insights into the process of stock market bottoming inVietnam, examining various factors and dynamics specific to the Vietnamese market Theyprovide valuable perspectives and findings that contribute to understanding theopportunities and challenges in the new cycle of the stock market in Vietnam

According to Trinh Thi Hoa Mai (2004) analyzes the bottoming process of theVietnamese stock market, focusing on market indicators and macroeconomic factors thatinfluence the process during the years 2000 and 2001 The research highlightsmacroeconomic issues related to the stock market, such as interest rates, money supply, and

government indicators, which are crucial for the stock market during periods of crisis.

Huynh Vu and Thuy Duong (2005) investigate the application of technical analysisindicators and psychology in identifying stock market bottoms in Vietnam They examine theeffectiveness of these indicators and their implications for investors

Bui Kim Yen and Nguyen Thai Son (2014) researched the development of Vietnam'sstock market under the influence of macro-economic factors with the macro factors that

affect stock market movements and studies the cycle of the Vietnamese stock market from

2007 to 2012 The research analyzed various macroeconomic variables, including GDPgrowth, inflation rate, interest rates, exchange rates, and foreign direct investment (FDI) Byexamining the correlations and interactions between these factors and the stock marketperformance, the authors aim to understand the dynamics and patterns of the Vietnamesestock market

2.1.3 Research gap

The research gap between domestic and foreign studies on the topic of "Researchingthe bottoming process of the stock market: Opportunities and challenges in the new cycle"can be observed in several aspects:

Data Availability and Accessibility: Domestic studies may encounter difficulties inaccessing comprehensive and reliable data on the Vietnamese stock market,especially historical data and financial reports In contrast, foreign studies may haveaccess to a wider range of data sources and international databases, enabling moreextensive analysis and comparisons.

Contextual Relevance: Domestic research tends to focus on the specificcharacteristics, dynamics, and regulations of the Vietnamese stock market It takes

into account the local economic and political context, as well as the unique challenges

and opportunities within the country Foreign research, however, may examine thestock market bottoming process from a more global or comparative perspective,considering multiple markets and their interactions

Methodological Approaches: Domestic research in Vietnam may be constrained bylimited resources, expertise, and infrastructure to conduct advanced quantitativeanalysis or employ sophisticated research methodologies Foreign research,particularly from developed financial markets, may utilize more advancedeconometric techniques, mathematical models, and computational tools to explorethe bottoming process of stock markets

Language Barrier: The language barrier may contribute to the limited exposure ofdomestic research to the international academic community Foreign researchpublished in English or other widely recognized languages may have broaderdissemination and reach, which can lead to increased engagement, collaborations, andcross-pollination of ideas

Research Emphasis and Topics: Domestic research in Vietnam may emphasize the

specific challenges and opportunities faced by the local stock market, such as

regulatory reforms, market integration, and investor behavior Foreign research, onthe other hand, may cover a broader range of topics, including cross-market analysis,global economic trends, and the impact of international events on stock marketbottoming processes

2.2 Theoretical basis for the researching the Bottoming Process of the Stock Market:Opportunities and Challenges in the New Cycle

2.2.1 Overview of stock market

2.2.1.1 Definition of stock market

According to Wikipedia, a stock exchange serves as a platform for buying and sellingstocks, bonds, and other securities It enables companies to list their stocks, enhancingliquidity and attracting investors Exchanges facilitate transactions and act as guarantors.Some stocks are traded over the counter (OTC) through agents, while others are listed on

multiple exchanges to attract foreign investment.

In addition to stocks, exchanges facilitate trading of fixed-income securities (bonds)and derivative securities, although the latter are primarily traded over the counter Trading

involves transferring securities from the seller to the buyer in exchange for money, with both

parties agreeing on a price The buyer becomes a shareholder and gains ownership in the

issuing company.

Participants in the stock market range from individual retail investors to largeorganizations like banks, insurance companies, retirement funds, and hedge funds fromaround the world Brokers execute their buy or sell orders on the exchange Some exchangesuse open outcry, where traders bid against each other on a physical trading floor Othersemploy electronic order matching through computer networks, such as the NASDAQ stock

exchange

Buyers specify buying prices, and sellers demand selling prices for stocks Tradesoccur when buying and selling prices match, with priority given to the first bidder when

multiple people bid the same price.

Stock exchanges facilitate securities trading, acting as a marketplace They providereal-time trading information for listed stocks, aiding in price discovery The New York Stock

Exchange (NYSE) combines a physical trading floor with an electronic order placement

system Orders are executed on the floor, passed to floor brokers, and entered into thedesignated market maker's headquarters to complete the trade Market makers maintain atwo-sided market, creating buy and sell orders Ifa gap exists between bid and ask prices, the

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market maker uses resources to narrow it Trade details are reported on a "ticker tape" andrelayed to the brokerage firm and investor Computers play a crucial role, particularly inprogram trading.

Brokers also try to bring parties together outside the exchange Well-known party exchanges like Instinet, Island, and Archipelago (acquired by Nasdaq and NYSE) offeradvantages such as avoiding commission fees but may face challenges like conflicting options.Financial managers are cautious when trading in such environments

third-Market participants include individual retail investors, institutional investors

(pension funds, insurance companies, mutual funds, hedge funds, etc.), publicly traded

companies, and robo-advisors who automate investment portfolios for individuals

2.2.1.2 The formation process of the stock market in Vietnam

According to Wikipedia, the formation process of the stock market in Vietnam can besummarized as follows:

1 Initial Stages (1980s-1990s): In the 1980s, Vietnam initiated economic reforms

known as Đổi Mới, which aimed to transition from a centrally planned economy to a

market-oriented economy During this period, the government introduced limitedstock trading activities through the “securities clubs.” These clubs provided a platformfor trading shares of state-owned enterprises among a small group of investors

2 Legal Framework (1990s): In the 1990s, Vietnam enacted various laws and

regulations to establish a legal framework for the stock market The Law on Securitieswas promulgated in 1995, setting the foundation for securities issuance, trading, andmarket operations The State Securities Commission (SSC) was also established as the

regulatory body responsible for overseeing the securities market.

3 Establishment of the Ho Chi Minh Stock Exchange (HOSE) (2000): The Ho Chi Minh

Stock Exchange, formerly known as the Ho Chi Minh City Securities Trading Center,was established in 2000 as the first official stock exchange in Vietnam Initially, it

operated as an over-the-counter (OTC) market, facilitating the trading of stocks,

bonds, and other securities The establishment of HOSE marked a significantmilestone in the development of the formal stock market in Vietnam

4 Hanoi Stock Exchange (HNX) (2005): The Hanoi Stock Exchange was established in

2005 to provide a platform for securities trading in the northern region of Vietnam Itfocused primarily on trading government bonds, corporate bonds, and stocks of listedcompanies HNX operates alongside HOSE and contributes to the development of thestock market in Vietnam

5 Market Reforms and Expansion (2000s-2010s): Over the years, Vietnam implemented

various reforms and initiatives to promote the growth and stability of the stock

market This included introducing new financial products, improving market

infrastructure, enhancing transparency and disclosure requirements, strengtheninginvestor protection measures, and attracting foreign investment These efforts aimed

to increase market liquidity, attract more issuers and investors, and align theVietnamese stock market with international standards

6 Market Modernization and Integration (2010s-present): In recent years, Vietnam has

focused on modernizing its stock market and integrating it with global financial

markets This includes implementing electronic trading systems, introducingderivative products, enhancing market surveillance and risk managementmechanisms, and pursuing international collaborations and partnerships Vietnamhas also made progress in attracting foreign investors through initiatives like therelaxation of foreign ownership limits and the introduction of the Vietnam QualifiedForeign Institutional Investor (V-QFII) program

2.2.1.3 Management and Supervision Mechanisms of the Vietnamese Stock Market

According to Phaply.net (2023), The Vietnamese stock market is managed andsupervised by several key entities and mechanisms These include:

e State Securities Commission (SSC): The State Securities Commission is the primary

regulatory body responsible for overseeing and regulating the securities market inVietnam The SSC's main role is to ensure the proper functioning, transparency, andfairness of the stock market It formulates policies, regulations, and guidelines related

to securities issuance, trading, and market operations The SSC also grants licenses tosecurities firms, supervises their activities, and takes enforcement actions againstviolations of securities laws

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e Stock Exchanges: The two main stock exchanges in Vietnam are the Ho Chi Minh Stock

Exchange (HOSE) and the Hanoi Stock Exchange (HNX) These exchanges provide thetrading platforms for securities, including stocks, bonds, and other financial

instruments They establish listing requirements for companies seeking to be listed

on the exchanges and ensure compliance with disclosure and reporting obligations.The exchanges also operate electronic trading systems, monitor market activities, andmaintain market integrity

e Securities Companies: Securities companies, also known as brokerage firms, play a

vital role in the Vietnamese stock market They act as intermediaries betweeninvestors and the market, facilitating securities trading, offering investment advisoryservices, and executing transactions on behalf of clients Securities companies arelicensed and regulated by the SSC, and they must adhere to certain standards and

requirements to ensure the protection of investors’ interests

e Securities Depository Center: The Vietnam Securities Depository (VSD) is responsible

for the safekeeping, clearing, settlement, and registration of securities in Vietnam Itoperates as a central securities depository, ensuring the efficient transfer ofownership and maintaining accurate records of securities ownership The VSD plays

a crucial role in facilitating the smooth functioning of the stock market by providingsecure and reliable custody services

2.2.2 Bottoming Process of the Stock Market and the new Economics Cycle

2.2.2.1 Definition of bottoming process

According to Invesco, the bottoming process in the stock market refers to a phase

characterized by a series of price lows and a subsequent stabilization of stock prices,

indicating a potential reversal in the prevailing downtrend It is a crucial stage in the marketcycle, as it often marks the end of a prolonged bear market and the beginning of a new bullmarket

During the period of bottoming in the stock market, there is a decrease in selling

pressure and an increase in buying interest This phase typically occurs after a prolongeddecline in stock prices, investor pessimism, and negative market sentiment The bottoming

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process involves a gradual shift in market dynamics as selling diminishes and buying begins

to gain momentum.

One crucial aspect of the bottoming process is the formation of price lows These lowsindicate a point where selling pressure subsides, leading to a relative balance between buyersand sellers As the bottoming process progresses, subsequent price lows may form, with eachlow typically higher than the previous one This higher low formation suggests a potentialchange in market sentiment and a growing willingness of buyers to participate

Increased trading volume is another characteristic of the bottoming process As stockprices stabilize and potential buying opportunities arise, trading volume tends to expand.This rise in volume indicates greater participation from market participants and reflects theirincreased interest in the market

Market indicators and technical analysis tools are commonly used to identify and

confirm the bottoming process These tools can include trendlines, moving averages,oscillators, and others Traders and analysts closely monitor these indicators to assess the

strength and sustainability of the bottoming process It is important to understand that the bottoming process does not guarantee an immediate and sustained upward movement in

stock prices It serves as a transitional phase that signals a potential shift in market direction.Additional market signals, such as a breakout above resistance levels or positive fundamentalfactors, are typically required to confirm the bottoming process

Investors and traders pay close attention to the bottoming process as it presentsopportunities for market entry or adding to existing positions However, it is crucial toexercise caution and consider other market factors before making investment decisions

Implementing proper risk management strategies and conducting thorough analysis of

market conditions are essential during this phase

2.2.2.2 Definition of new economics cycle

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According to Investopedia, a new economic cycle in the stock market refers to adistinct phase characterized by changes in economic conditions, market trends, and investorsentiment It represents a shift from one phase of the market cycle to another, signaling a

change in the overall market direction Economic cycles in the stock market are influenced

by macroeconomic factors like GDP growth, inflation rates, interest rates, employment levels,

and consumer spending These factors impact corporate earnings, investor confidence, andmarket valuations A new economic cycle reflects a shift in these underlying economicconditions, which can have significant implications for stock market performance During anew economic cycle, there are changes in market dynamics, investor behavior, andinvestment strategies A new economic cycle can include periods of expansion, where theeconomy is growing, corporate profits are increasing, and stock prices are generally rising.This phase is characterized by optimism, increased investor participation, and bullish market

sentiment However, it also encompasses periods of contraction or recession, with slower

economic growth, declining corporate earnings, and downward pressure on stock prices.These phases are marked by pessimism, increased risk aversion, and bearish market

sentiment

The duration and characteristics of a new economic cycle can vary, depending on

economic conditions and external factors such as government policies, global economictrends, geopolitical events, and technological advancements Recognizing and understandingthe new economic cycle is crucial for investors, market participants, and policymakers Itprovides insights into market dynamics, investment opportunities, and risks Investors canalign their investment strategies with the prevailing economic conditions, making informeddecisions about asset allocation, sector selection, and timing of trades

Market analysts and economists utilize various indicators and tools to track andanalyze the new economic cycle These include economic indicators like GDP growth rates,inflation rates, unemployment data, consumer confidence indices, and leading economicindicators Technical analysis tools, trend analysis, and market breadth indicators can alsooffer valuable insights into market trends and potential turning points in the economic cycle

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Chapter III: Research methodology

The commonly used research approaches worldwide typically include qualitativeresearch, quantitative research, and mixed-method research by Dima & Ramez (2007)

While traditional studies predominantly employ qualitative and quantitative methods,

there has been a recent increase in the use of mixed-method approaches Over the past

three decades, researchers have extensively discussed and debated the concepts, methods,and quality standards associated with mixed-method research, which combines qualitativeand quantitative elements

The quantitative research method provides data to describe the distribution ofcharacteristics and properties of the research population, examine relationships between

factors, and establish causal relationships However, this method has limitations as the

responses from participants may be influenced by various factors, resulting in subjectivity.Additionally, interpretations of the data can vary among participants, despite the use of

standardized scales In contrast, the qualitative research method focuses on the social

process rather than relying on social structures as observed in quantitative research It

involves in-depth interviews to elucidate detailed information and establish connections

between the researcher and research subjects, facilitating a comparison between theory

and reality Qualitative research follows an open structure, where the interviewer prepares

key questions to explore specific aspects and issues of interest However, there are also

open-ended questions that allow for free exchange and further clarification of relevant

topics Moreover, qualitative research employing in-depth interviews enables the

researcher to analyze, evaluate, and compare responses by using a consistent set of

questions across different individuals, reducing time constraints and emphasizing core

research issues All questions are designed based on an overview of existing theory and

previous research conducted by scholars A limitation of qualitative research lies in its

subjectivity and the challenge of generalizing findings Conducting qualitative research

typically involves using a predetermined research framework, which encompasses a

collection of broadly defined concepts to guide the study (Jerry, 2007) Merriam (1998)

defines qualitative research as an umbrella term encompassing various forms of

information investigation that aid in understanding and explaining the significance of social

phenomena The primary objective of this study is to analyze and provide

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recommendations for investors Therefore, to achieve this research objective, the author

has opted for a qualitative analysis approach Based on this, the research design is as

follows:

cb sap sab

Figure 3.1 Research design

1 Determining the research problem: the research problem revolves around

understanding the bottoming process of the stock market, exploring opportunitiesand challenges, and providing insights and guidance for investors, analysts, and

policymakers in navigating the new cycle

2 Research content: the article will provide a comprehensive analysis of the

bottoming process of the stock market, offering insights into opportunities and

challenges in the new cycle It aims to guide investors, analysts, and policymakers inmaking informed decisions and navigating the market during the bottoming phase

3 Research method The research on "Researching the Bottoming Process of the Stock

Market: Opportunities and Challenges in the New Cycle" utilizes both quantitative

and qualitative analysis methods The combination of quantitative and qualitativeanalysis provides a comprehensive and robust approach to investigating the

research problem, ensuring a more nuanced and insightful exploration of the stock

market's bottoming process and the opportunities and challenges it presents in thenew cycle

4 Research results The research results aim to provide valuable insights and practical

recommendations to investors, analysts, financial institutions, policymakers, andregulators in navigating the bottoming process of the stock market and capitalizing

on the opportunities in the new cycle

3.1 Define research problem

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Based on the overview of research both domestically and internationally on "Research

on the bottoming process of the Vietnamese stock market: Opportunities and challenges inentering a new cycle," I have identified the research subjects as individuals who are currently

investing in the Vietnamese stock market

3.2 Research concept

The research on the topic "Research on the bottoming process of the Vietnamesestock market: Opportunities and challenges in entering a new cycle" was conducted fromMarch 2023 to May 2023 The study aimed to primarily address the following research

questions:

+ What are the industries that investors should and should not invest in during the

market recovery period, based on the research on the bottoming process of the stock

market?

+ How did the process of forming the bottom of the Vietnamese stock market unfold in

2020, and which industries bottomed out first and later?

+ What were the expectations and realities for investors during the year 2020?

+ What opportunities and challenges arise when transitioning into a new cycle of the

Vietnamese stock market?

3.3 Research Methodology

The study employed a semi-structured technique for conducting in-depth interviews

to gather qualitative data A questionnaire was developed for conducting direct in-depthinterviews (see Appendix 2) with research experts in the stock investment field based on areview of prior studies The findings from the qualitative research were used to validate thetheoretical and measurement models The initial survey was conducted with experts fromHanoi, and the purpose of the interviews was to gather additional information to clarify theprocess of market bottom formation in the stock market

Once the research hypotheses and models were formulated, a questionnaire was

drafted for data collection To maintain accuracy and objectivity, the questionnaire

underwent three stages: (1) online interviews, (2) follow-up questions, and (3) reflection

self-16

The final in-depth interview questionnaire was divided into three sections:

Section 1: Introduction and information security commitment This section providedrespondents with an overview of the author, the research purpose, the importance of their

opinions, and the commitment to information security This helped build trust and enable the

respondents to provide accurate survey information

Section 2: Basic information (demographic information): This section requestedrespondents’ basic personal information, including their working organization, full name,

position, and job-related information.

Section 3: Interview content: This section had four major sections: (1) Pre-marketbottom formation investment process, (2) Post-market bottom formation investmentprocess, (3) Signs to identify a deep market decline, and (4) Investment experiences Thequestions within each section were arranged randomly This was the most important part of

the questionnaire, providing information for statistical analysis of the market bottom

formation process and new cycles in the research Here is the scope of this topic:

1 Investigate key market indicators commonly associated with market bottoms These

indicators may include market valuation metrics, earnings growth, interest rates,investor sentiment surveys, and technical analysis indicators Analyze their behaviorduring previous bottoming processes in Vietnam and evaluate their potentialpredictive power

2 Assess the performance of different sectors during the bottoming process Identify

sectors that have historically shown resilience and strong recovery potential duringmarket bottoms, as well as sectors that have faced challenges Analyze the factorscontributing to the differential performance of sectors during the bottoming phase

3 Examine investor behavior and sentiment during market bottoms Conduct surveys

or interviews to gain insights into investor psychology, risk appetite, and making processes during the bottoming process Understand how investor sentimentevolves throughout the different stages of market recovery

decision-4 Identify investment opportunities and challenges that arise during the bottoming

process This could involve strategies for identifying undervalued stocks, sectors withgrowth potential, or investment instruments that perform well during the marketrecovery phase Assess the risks associated with investing during the bottomingprocess and suggest risk management approaches

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5 It is crucial to define the specific time period under study and the available data

sources for conducting the research Consider the resources and constraints, such asdata availability, time, and expertise, to ensure the research scope is realistic andachievable

The study conducted in-depth interviews with five research3.3.1 Method of In-Depth Interview

The research utilized a semi-structured in-depth interview method, whichincorporates various types of questions, such as closed or open-ended and structured orsemi-structured, to comprehend the interviewees’ thoughts, feelings, and actions In thisstudy, the interviewees were asked about their actual cash flow management situation intheir company and their opinions on the difficulties and advantages of the process

The outcome of this method is a set of interview questions in an in-depth interview

questionnaire for professionals in the investment field This questionnaire is intended toprovide more profound insights into the stock market situation in Vietnam in 2020, evaluate

the stock market's impact, and suggest solutions and recommendations to enhance investors’efficiency in the stock market

3.3.2 Implementation of In-Depth Interviews

Due to constraints in time and resources, the interviews were conducted throughemail and online platforms The duration of each interview ranged between 1 and 2.5 hours.The primary interviewer was the author, with additional support from note-taking orobservation personnel Recording was done only after obtaining the interviewee's approval

3.3.3 Target Group for In-Depth Interviews

Research experts: The questionnaire content is provided in Appendix 2, and the list ofinterview experts is also given in Appendix 2

3.3.4 Processing of In-Depth Interview Data

After each interview, the information was collected and organized in textual formbased on predefined topics The data was compiled on Excel The research compared andcombined the opinions of each interviewee, computed the frequency of keywords, and cross-checked the information with direct observation and desk research to verify the data'sreliability and supplement it if required The findings of this process were presented in thecurrent situation and solution chapters of the study

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3.3.5 Model for Qualitative Research

Apart from investigating the market bottom formation process in the stock market,the qualitative research approach was also employed to assess the impact of various factorsthat influence investor outcomes The interviewees were requested to rank these factorsbased on their importance and provide an explanation for their choices

3.3.6 Model for Quantitative Research

Research using the ARIMA (Autoregressive Integrated Moving Average) model is one of thecommonly used methods to assess the bottoming process of the stock market

The ARIMA model is a time series forecasting model that can be used to analyze and predicttrends in data The ARIMA model is composed of three main components:

e Autoregressive component: describes the dependence of the current value on

previous values in the series

e Moving average component: describes the dependence of the current value on

previous deviations in the series

e Integrated component: describes the variation of the series over time

When using the ARIMA model to assess the bottoming process of the stock market, we oftenuse some technical indicators such as the moving average, Japanese candlestick chart., or RSI(Relative Strength Index) to assess the overall trend of the market

Some basic steps to use the ARIMA model to assess the bottoming process of the stock market

include:

1 Collect data on stock prices for the period to be researched

2 Define the parameters for the ARIMA model such as p, d and q The parameter p

indicates the number of inputs that are linearly dependent, the parameter q indicatesthe number of errors in the forecast input, and the parameter d indicates the degree

of integration of the data

3 Analyze and evaluate the bottoming process of the stock market using the ARIMA

model according to the selected technical indicators Select the parameters to best fitthe input data

4 Predict the future trend of the stock market based on the ARIMA model and selected

technical indicators

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Chapter IV The results of research

4.1 The results of survey

This research study describes the bottoming process of the Vietnamese stock marketand focuses on evaluating the opportunities and challenges in transitioning to a new cycle.Conducted with the participation of 244 survey respondents, this study aims to assess thefactors influencing the bottoming process and identify significant prospects in Vietnam'sstock market

Among the 244 survey participants, 95% which corresponds to 232 individuals are

employed, while the remaining minority are university students Therefore, the survey willmainly focus on the group of working individuals who have investment experience in thestock market

® Student

@ Employed

Chart 4.1: Proportion of people who voted for students or have started working

Among them, the majority have investment experience ranging from 3 to 10 years,accounting for nearly 70% of the participants Following that, 20% of the respondents haveinvestment experience between 10 and 15 years Approximately 10% of the participantshave investment experience ranging from 1 to 2 years, and 1% of the investors have beeninvesting for more than 15 years

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During the market downtrend period from November 2019 to April 2020, what percentage loss do you estimate?

Chart 4.2: Estimate percentage loss during 2020

During the downturn period of the Vietnamese stock market from late 2019 to the end

of the first quarter of 2020 because of covid-19 global, the survey results from 244

participants revealed some notable information The majority of participants (41%) reported

losses ranging from 20-30%, which was the highest percentage of losses among the surveyed

segments Furthermore, 35.7% of participants reported losses ranging from 30-50%, which

was also a significant percentage In contrast, 19.3% of participants reported losses ranging

from 10-20%, and only 4.1% reported losses ranging from 0-10% and no one lost more than

50%

These results indicate that during the downtrend period of the Vietnamese stockmarket, some investors experienced relatively high losses This may reflect the difficulties

and challenges in achieving profits in an unfavorable market However, to gain a more

comprehensive understanding of this issue, further analysis is needed to explore the causes

and factors related to these losses, as well as to study opportunities and solutions to

overcome challenges during the downtrend period of the stock market

To delve deeper into the details of why such significant losses occurred, let's take a

look at the industries in which the survey participants invested in 2019, prior to the sharp

decline in the stock market

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What were the three main sectors you invested in during 2019?

244 câu trả lời

Real estate and services | | 47 (19,3%)

Bak re 5 (307%) Food production 33 (13,5%)

Transportation and warehousing i — 32 (13,1%)

Gas, water, and other utilities = 45 (16.4%)

Construction and building materials | | 69 (28,3%)

Electricity ns — 67 (25%) Beverages A 37 (15.2%)

} 20 40 60 80

Chart 4.3: Proportion of investment sector preferences in 2019

This analysis of results provides information on the investment preferences andtrends of members before the market decline The banking sector received the highest

percentage of votes, indicating significant interest in the industry The construction and

construction industries also attracted considerable interest, showing the survey

respondents’ preference for these sectors Basic needs-related industries such as food

production and utilities received moderate attention Industries such as transportation,

warehousing and oil and gas also attract a small portion of investors Meanwhile, industries

such as gas, water and other utilities, chemicals, securities, software services and computing,

insurance, and electrical and electronic equipment also received a significant number of

participants family

Analysis of these results shows that the banking and construction sectors are seen asattractive sectors for investors This may be because banking and construction are often seen

as stable sectors and play an important role in economic development Meanwhile, sectors

related to basic needs such as food production and utilities also appreciated, possibly due to

the stability and holding of prices during this period.

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Meanwhile, after the market bottoming process and entering a new cycle in the stockmarket, three sectors receive the most attention, namely securities, oil and gas, andconstruction and building materials Notably, stocks in the securities sector draw particularinterest, partly because the securities industry is closely tied to market movements.

Securities companies often benefit from securities trading activities, providing brokerage

and investment advisory services Therefore, when the stock market rises, securitiescompanies can become attractive options for investors Another factor is the enhancement ofliquidity As the stock market recovers, trading activities and liquidity tend to increase.Investors tend to focus on the securities sector due to the high demand for trading andinvestment Increased liquidity facilitates easy and quick buying and selling of stocks,

attracting investor interest.

Regarding the oil and gas sector, investor interest arises from the increase in oil prices

As the stock market recovers, energy demand typically rises This can lead to an increase inoil prices, benefiting oil and gas companies When oil prices rise, oil and gas explorationcompanies can generate higher profits, resulting in an increase in their stock prices.Additionally, when the stock market recovers, the overall economy tends to grow, leading toincreased energy demand Oil and gas companies can seize this opportunity to expandproduction and sell energy, generating higher income and profits The growth in productionand revenue of oil and gas companies can drive stock prices upward Moreover, this isaccompanied by the global economic recovery with expectations of a sharp increase inenergy demand

In the construction and building materials sector, there is also an increase due toeconomic recovery and the high demand for public investment in areas such asinfrastructure, housing, and commercial projects Particularly, there is a boost in real estateinvestment When the stock market recovers, investors tend to seek safe and stableinvestment sectors Real estate is often considered an attractive investment sector during therecovery phase, creating increased demand for construction and building materials

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