Market sentiment to improve further on supportive news

Monday, Nov 06, 2023 07:00

An investor talks to a trader at an office of Bảo Việt Securities Company. — VNA/VNS Photo

The stock market recovered strongly in the last three sessions, raising expectations that the VN-Index is in a stage of breaking out from the bottom. Analysts believe that the recent supportive news will improve market sentiment and boost the recovery of benchmark indices.

Last week, the VN-Index on the Hồ Chí Minh Stock Exchange (HoSE) closed Friday at 1,076.78 points, a slight increase of 0.12 per cent, while the HNX-Index on the Hà Nội Stock Exchange (HNX) finished lower at 217.75 points.

For the week, however, both indices saw a gain, with the former up 1.5 per cent and the latter up 7.1 per cent.

According to Saigon-Hanoi Securities JSC (SHS), the market broke two straight weeks of losing. Although last week’s recovery momentum was not large, it helped the VN-Index not return to the downtrend and reach the balance area to accumulate again.

Domestic economic activities are often busiest in the last quarter of the year and business results of listed companies in the third quarter also showed positive signs.

Meanwhile, the US Federal Reserve (Fed) and the European Central Bank (ECB) paused raising interest rates, but they remained at high levels. And the cutting roadmap is unclear.

Geopolitical uncertainties are still complicated, making energy prices unpredictable while winter is approaching, which can impact global inflation.

However, historical statistics showed that geopolitical events often did not have a long-term influence on the performance of stock indices, said VNDirect Securities Corporation.

Đinh Quang Hinh, Head of the Macro and Market Strategy Department of VNDirect, said that the sharp fall in the previous two weeks triggered negative sentiment among investors. Risk-off sentiment along with forced selling caused indices to continue correcting in the first three trading sessions of the week.

The recovery momentum appeared in the afternoon session on Wednesday when the market expected the Fed to keep the rates unchanged.

And in fact bottom-fishing demand increased, lifting the Vietnamese stock market in the last three sessions of the week, after the Fed announced it would leave US rates unchanged.

The market’s benchmark VN-Index had recouped nearly 60 points from the bottom.

VNDirect expected that the recent supportive news would improve market sentiment and promote the recovery of the indices. Specifically, the retreats of US Government bond yields and US dollar after markets priced the Fed being done raising rates, would help cool down domestic exchange rate pressure.

This could improve room for monetary policy of the State Bank of Vietnam (SBV) and investors' sentiment in the last months of the year.

It could be seen that the market's recent strong correction was largely triggered by exchange rate pressure, so when the exchange rate cools down, the market might enter a clear recovery, VNDirect said.

After a long correction, the stock market's valuation had returned to an attractive level, with the price-to-book ratio (P/B) of the VN-Index nearly reaching the mid-term bottom set in November 2022 and the bottom during COVID-19.

Therefore, the securities company believed that this would be a good time for medium and long-term investors to start accumulating stocks for 2024.

Phạm Bình Phương, a securities expert from Mirae Asset Securities (Việt Nam), said that the strong recovery of VN-Index in the last three sessions of the week raised expectations that the index was in a phase of breaking out from the bottom.

Given a recovery of 60 points in the last sessions, short-term profit-taking activities might cause the VN-Index to fluctuate and correct this week.

However, Mirae Asset expected the recovery to continue and the important resistance would be the 1,098 point-level. — VNS

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