Ho chi minh stock exchange

SHS forecast the profit-taking will enhance this week and the VN-Index may return to 900-1,000 points.

After having kept the market increasing for five consecutive weeks, investors may get some rest this week and raise the cash-over-asset ratios in their pockets.

Investors at SSI Securities office. Photo: tinnhanhchungkhoan

With such market outlook, this week is expected to be choppy for the Vietnamese stock market.

Vietnam’s benchmark VN-Index on the Ho Chi Minh Stock Exchange last week gained total 1.16% to climb to a 13-month high of 1,021.49 points.

The VN-Index has increased by total 11% in five straight weeks since October 29.

The market was hit in the first trading day of last week after new coronavirus infection cases had been reported in Ho Chi Minh City over the weekend.

But then strong domestic purchasing power helped lift the index up in four consecutive trading days with a total gain of 1.83%.

According to Mr. Dinh Quang Hinh, Director of market strategy and macroeconomics at VNDirect Securities Corp, investors did not panic over the new virus-infected cases.

Compared to the market sell-offs in late March and July – when new Covid-19 cases were reported – last week’s selling pressure was obviously lighter, he said.

The VN-Index increased by at least 0.54% each day between Tuesday and Thursday but the growth slowed down on Friday to 0.17%.

“Buyers are becoming cautious,” Saigon-Hanoi Securities Co (SHS) said in its weekly report. “Last week’s total growth and order-matching trading volume fell slightly from the previous week.”

“We can see investors are realizing their profits in the large-cap sector and moving into penny stocks,” Mr. Dao Tuan Trung, Market Analysis Director at Vietinbank Securities Co, said.

“Penny stocks made big gains in the last two trading days of the week and trading liquidity remained high in those days,” he said.

Trading value on HoSE hit the peak of VND14 trillion (US$606.7 million) last Wednesday and fell to average VND10.2 trillion (US$441.3 million) last Thursday and Friday.

Trading volume also dropped from more than 684.5 million shares on Wednesday to average 536 million shares in the last two days.

“Investors will continue selling large-cap stocks in the first few days next week after their strong rallies,” Mr. Trung said. “The market will consolidate and the VN-Index is expected to reach higher resistance levels such as 1,040 points.”

SHS forecast the profit-taking will enhance this week and the VN-Index may return to 900-1,000 points.

To boost the market, investors must keep the cash flowing from a sector to one another, said KB Vietnam Securities Co’s market Strategy Director Le Anh Tung.

“But in my opinion, there is not much room for purchasing stocks at the moment as some leading large-caps are already overbought,” Mr. Tung said. “That will lead to some falling days with increased selling pressure. And a short correction is needed at the moment to make the market growth sustainable.”

The local stock market is expected to be upgraded to the emerging status by 2022.

A number of laws that came into effect at the start of 2021 in Vietnam are expected to set the legal basis for further market developments.

World’s major largest index provider Morgan Stanley Capital International (MSCI) gave the view in its 2021 Global Market Accessibility Review, which covers market accessibility assessments for 83 markets.

Investor at a securities company. Photo: Cong Hung

According to the MSCI, the restructuring of the two Vietnamese exchanges [Ho Chi Minh City Stock Exchange and Hanoi Stock Exchange] into a single Vietnam Stock Exchange (VSE), the establishment of the Vietnam Securities Depository and Clearance Corporation (VSDC), or Non-voting Depository Receipts may potentially improve market accessibility once these policies are implemented.

The MSCI also pointed out the fact that the Ho Chi Minh City Stock Exchange (HOSE) in Vietnam has been impacted by capacity limitations in its trading system since 2021.

This has resulted in trade execution difficulties on days with relatively high trading volumes, in turn prompting exchange and the regulators to work on short-term and long-term solutions to address this issue.

“MSCI will continue to monitor these developments closely,” it noted.

Expectation to be upgraded to emerging market by 2022

MSCI’s assessment on frontier markets. Source: MSCI

While pointing out to positive improvements of the market, the MSCI noted there have been no significant development that could result in any rating changes.

The MSCI referred to a number of fields that should be addressed, ranging from foreign ownership limit subject to certain conditional and sensitive sectors, no offshore currency market and constraints on onshore currency market, lack of stock market information in English, or off-exchange transactions and in-kind transfers requiring prior approval from the State Securities Commission of Vietnam.

The rating agency is scheduled to announced the annual market classification of stock markets globally, including Vietnam, on June 25.

Bao Viet Securities Company (BVSC) in a note said while market upgrade would be an irreversible trend and in line with Vietnam’s efforts in global economic integration, it is unlikely that the market could be upgraded in this review.

Sharing the same view, SSI Securities Corporation (SSI) said the chance is higher for the stock market to realize its goal of becoming an emerging one by the next review in 2022.

The price to earnings (P/E) of the benchmark VN-Index is not quite cheap to attract new inflows as it is 15.1x (as of 30 September) versus 14.5x – 15x in the pre-Covid time.

Vietnam’s stock market is predicted to go sideways in October following its strong rises in two previous months, which comes as a result of the continuous selling from foreign investors and the “Sell the news” reaction, according to Viet Dragon Securities Company (VDSC).

The benchmark VN-Index surpassed the 900-mark in early September and ended the month at 905, representing a 3% increase month-on-month and outperforming other regional indices for a second consecutive month, such as the Stock Exchange of Thailand (-6%), the Korea Stock Exchange Composite (0.1%), and S&P 500 (-4%).

The daily average liquidity in the Ho Chi Minh City Stock Exchange (HOSE), home to the majority of large-caps, via matching order was VND5.5 trillion (US$236.68 million). Compared to July and August, this was a big jump with an increase of 47% and 28%, respectively.

In September, foreign investors became net buyers on HOSE after two consecutive months of selling. However, the main inflows were from put-through transactions.

In terms of order-matching transactions, the upward move of the VN-Index did not stimulate foreign investors purchase. Specifically, they sold intensively to the tune of VND4.5 trillion (US$193.64 million), making September the largest net selling month in the last five months.

Coming to September, VDSC said the “Sell the news” reaction (stock trading based on just rumors) could create pressure on the VN-Index, as some stocks in the VN-30 Index (formed by the 30 largest and most liquid stocks) increased strongly in August and September, given rumors about decent business performance in the third quarter of 2020 or private placement to strategic shareholders, especially banks.

Recently, the State Bank of Vietnam (SBV), the country’s central bank, announced the decision to cut the policy rates. However, VDSC expected that it would not have a significant impact as some banks have already reduced interest rates and liquidity in the banking system remains abundant.

According to VDSC, Vietnam’s 5-year credit default swaps (CDS) have seen upward moves recently, which indicates a higher probability of the VN-Index cooling off. Meanwhile, the price to earnings (P/E) of the VN-Index is not quite cheap to attract new inflows as it is 15.1x (as of 30 September) versus 14.5x – 15x in the pre-Covid time.

Another factor that has direct influence on Vietnam’s stock market is that of the US, but again, its complicated situation as a result of uncertainties surrounding the US presidential election make it hard to predict potential impacts on the VN-Index.

With all factors considered, the securities firm expected the market to fluctuate in the range from 865 – 920 for this month.