An investor performs a transaction on a trading floor in Hà Nội. — VNA/VNS Photo

The stock market's recovery, which began in late April, extended into May, but profit-taking pressure rose as the market approached a strong resistance level and there were signs of a resurgent USD exchange rate following the upward trend of the US Dollar Index (DXY).

The VN-Index on the Hồ Chí Minh Stock Exchange (HoSE) closed last week at 1,244.7 points and the HNX-Index on the Hà Nội Stock Exchange (HNX) was last traded at 235.68 points.

Both indices posted a weekly gain, with the former up 1.9 per cent while the latter soared nearly 3.3 per cent.

The benchmark VN-Index recorded a strong start last week, surging over 20 points and surpassing the 1,240 level. However, the following sessions saw a slowdown in the upward momentum, with the market trading sideways around the 1,240 - 1,250 range.

Profit-taking pressure emerged as the index approached a strong resistance level and signs of a resurgent USD exchange rate after the DXY index, gauging the greenback's strength against a basket of six major currencies, moved up.

The USD/VNĐ exchange rate remained volatile during the week. On May 10, the State Bank of Vietnam (SBV) announced the central exchange rate at VNĐ24,271 per dollar, up 26 đồng from the beginning of the week. Under the +/-5 per cent margin, banks are implementing a ceiling exchange rate of VNĐ25,484 per dollar and a floor exchange rate of VNĐ23,057 per dollar.

At BIDV, the rates were quoted at VNĐ25,184 - 25,484, up 27 đồng from the start of the week, while Vietcombank’s rates stood at VNĐ25,154 - VNĐ25,484, an increase of 27 - 37 đồng compared to the beginning of the week.

Experts from ACB Securities Ltd., Co (ACBS) anticipate that the exchange rate pressure in Việt Nam will be persistent throughout the second quarter of 2024, until the US Federal Reserve officially cuts interest rates. This could lead to tighter liquidity of the domestic currency and a potential increase in interbank VNĐ interest rates, creating short-term pressure on the Vietnamese stock market.

Historical data showed that whenever the exchange rate rises by more than 2 per cent, the stock market tends to undergo corrections. The extent of these corrections depends on various factors, but higher exchange rates lead to capital withdrawals from foreign investors, cautious sentiment and short-term pressures.

Foreign investors had an active week of trading, primarily focused on selling activities. They were net sellers with a total value of VNĐ3.3 trillion (US$130 million) last week, with selling pressure intensifying in the last three trading sessions.

Market liquidity slightly improved compared to the final week of April but remained below the 20-week average.

For the week, the average liquidity on HoSE reached 755 million shares, a 17.5 per cent increase compared to the previous week, with a trading value of over VNĐ19.7 trillion, up 19.2 per cent.

Despite a week of gains, profit-taking pressure emerged in the last two trading sessions, preventing the VN-Index from conquering the 1,250-point resistance level.

Analysts from Vietnam Construction Securities JSC suggest that although profit-taking pressure is rising, strong buying momentum indicates a potential continuation of the consolidation and sideways trading trend in the coming sessions.

Saigon - Hanoi Securities JSC (SHS) notes that positive news regarding the US Department of Commerce considering Việt Nam as a market economy was well-received.

However, the continuous surge in domestic gold prices and signs of currency appreciation impacted investor sentiment. Given the current circumstances, the market is likely to remain consolidated.

Meanwhile, Mirae Asset Securities (Vietnam) said that during the final two declining sessions, there was a noticeable divergence, with several stocks showing positive gains towards the session's end. This trend is expected to continue in the upcoming week.

Investors should keep an eye on key levels, including support at 1,225 - 1,230 and resistance at 1,255 points, the securities firm added. If the VN-Index surpasses 1,255 points, investors should be cautious of a strong resistance zone at 1,275 - 1,280 points. — VNS