Cash flows, positive news support market

Monday, May 15, 2023 03:22

Traders look at an electric screen displaying stocks' movements. — Photo

The Vietnamese stock market posted a weekly gain last week, buoyed by the improvement of cash flows and supportive news lifting the market’s outlook.

Even though measures to support the economy have not yet shown results, the market is still likely to react positively, said analysts.

On the Ho Chi Minh Stock Exchange (HoSE), the VN-Index closed last week at 1,066.9 points, while the HNX-Index on the northern bourse, the Ha Noi Stock Exchange (HNX), was at 215.1 points.

Both benchmark indices logged another weekly gain, with the former up 2.6 per cent and the latter rising 3.5 per cent.

VNDirect Securities Corporation said that the market experienced a better-than-expected week thanks to the return of domestic cash flows after investors withdrew capital from the market at the end of April, ahead of the long holiday.

Thereby, the market's liquidity increased by 14 per cent last week.

US inflation data in April, which maintained a downward trend and was lower than the market's expectations, reinforces the possibility that the US Federal Reserve may decide to pause the tightening policy at the upcoming meeting in June.

Meanwhile, the State Bank of Vietnam (SBV) also said that it is considering the possibility of further lowering the operating interest rate in the near future to support the recovery of economic growth.

The Government is also accelerating the drafting process for early approval of the Power Development Plan VIII and preparing to submit to the National Assembly for consideration and approval of the Resolution on reducing VAT 2 per cent in the upcoming meeting.

This helped lift investor sentiment and attract cash flows back to the market.

With those positive signals, VNDirect believes that a short-term uptrend in the market has been formed.

Therefore, investors can increase the proportion of stocks if the VN-Index retests the range around 1,050 - 1,055 points, while prioritising stock groups that are impacted by supportive news.

On the contrary, a strong resistance zone of VN-Index is 1,080 - 1,110 points. The securities firm also warns investors not to buy at high prices if the VN-Index approaches the above resistance zone.

According to Saigon-Hanoi Securities JSC, the Government is also actively offering solutions to remove difficulties for the corporate bond and real estate markets.

Although macro challenges remain as the measures to support the economy have not shown results and the global economy is still very unstable, it is possible that the market will react positively.

SHS said that one piece of positive news cushioning the market last week was that SBV directed, orientated, and called commercial banks to continue reducing interest rates for businesses, creating favourable conditions to expand and further boost credit from now until the end of the year.

Thanks to that, real estate stocks, the group that received a lot of positive news, had performed well with the improvement in liquidity. Stocks in financial services and securities sectors also inched higher.

According to the 2023 shareholder meeting plans of 261 out of 400 enterprises listed on HoSE, their expected profits before tax fall sharply, mainly in the non-financial groups, while the banking, financial services and insurance industries continued to set growth plans for this year, said Mirea Asset (Vietnam) Securities.

Targeted profits before tax for 2023 weakened across most sectors, particularly utilities, energy, materials, transportation, and retail.

Industries entering the declining cycle are mainly related to export activities such as logistics, chemicals, fertilisers, textiles, and seafood.

The main obstacle is the gloomy export outlook amid recession risks in the US and European Union and rising competition from China after the country reopens its economy, Mirea Asset said. — VNS

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