Market volatility expected as selling pressure rises

Monday, Oct 08, 2018 07:34

Investors trace market fluctuations at the trading floor of Tan Viet Securities Joint Stock Company in Ha Noi. — VNS Photo Truong Vi

A big drop on Friday has signalled Viet Nam’s benchmark VN-Index may continue falling this week as investors worry about global markets and earn some profits from local stocks.

The benchmark VN-Index on the HCM Stock Exchange dropped 1.49 per cent to close Friday at 1,008.39 points.

The southern market index had gained total 1 per cent in the previous three straight sessions but Friday’s decline has erased its entire growth last week.

The VN-Index ended last week 0.86 per cent lower than the previous one.

The HNX Index on the Ha Noi Stock Exchange lost 1.37 per cent to end at 114.67 points, putting an end to its two-day increase of total 1.1 per cent.

The northern market index dropped total 1.38 per cent on a weekly basis.

An average of nearly 308 million shares was traded in each session last week, worth VND9.5 trillion (US$412.4 million).

The sharp increase in trading liquidity was attributed to foreign purchases of consumer firm Masan shares on Tuesday and a sell-off on Friday.

Investors exchanged VND17.3 trillion worth of stocks on Tuesday, including VND11 trillion worth of foreign purchases for Masan shares.

The figure was VND11.6 trillion for Friday as a sell-off was triggered by the escalation of trade tensions between the US and China after some Chinese tech firms were reported to have installed spy chips in their products.

The Vietnamese stock market had gone through a big Friday decline as confidence in local stocks was depleting at the 1,025-point level, BIDV Securities JSC (BSC) said in its weekly report.

The local market was also affected by negative movements of global stocks, it added.

Hawkish comments by US central bank Fed officials on more interest rate hikes boosted the US 10-year bond yield to 3.2 per cent – the highest since 2011.

Those two factors have dampened the confidence of foreign investors in local stocks and limit the possibility of the VN-Index overcoming its 1,025 point level.

Friday’s decline doesn’t mean the uptrend is over but selling pressure has risen, proving that investors are trying to take profits from the stocks that have already been priced for earnings prospects, BSC said.

Therefore, the 1,000-point level would be a big test for the VN-Index this week, BSC added.

Market analyst Nguyen Huu Binh told tinnhanhchungkhoan.vn that the stock market has moved with a strong mixture among local stocks in recent weeks.

Some stocks have gained 50-60 per cent while some are staying at their low-price ranges, so those that have gained substantially will encounter strong selling pressure in the short term, he said.

Cash flow is still weak even when the market has entered its short-term uptrend, Binh said, adding that the earnings season is the only factor to count on at the moment.

“However, this third-quarter earnings season may not be impressive and the market will continue diverging. Those that have gained strongly would not extend growth while lower-than-expected earnings reports would drag their prices down significantly.” — VNS

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