Opportunities still exist but market will struggle to make big advance

Monday, Jun 08, 2020 08:06

A statue of a bull and bear outside the HCM City Stock Exchange. Busier economic activities could make less free capital available to the stock market. Momentum to drive the stock market in June will be weaker than it was in May. — Photo hsx.vn

The Vietnamese stock market may continue to maintain growth this month but momentum will be weaker than it was in May, according to brokerages.

According to Viet Dragon Securities Company (VDSC), given that many countries have gradually resumed economic activities, there will be more workload for Viet Nam.

“Busier economic activities could make less free capital in the stock market. Momentum to drive the market in June will be weaker than it was in May. However, we see no issues which could hurt the market heavily at this time.

“As such, it is possible for the VN-Index to move higher in June. Buying at this time should be carefully considered based on stock selection,” VDSC said.

The VN-Index at the Ho Chi Minh Stock exchange (HoSE) climbed 0.26 per cent to close Friday at 886.22 points.

The southern market index had gained a total of 2.52 per cent last week.

An average of 448.8 million shares were traded during each session last week, worth VND6.5 trillion (US$278.6 million).

Effective containment of the COVID-19 pandemic and easing of lockdowns in the US and Europe has excited investors. In Viet Nam, the central bank has continued to cut policy rates and the short-term deposit ceiling rate. This created a scenario where local investors and foreign funds bought into the market in the past few months, VDSC said.

“We would like to remind that Q2 will be the quarter seen as the worst for business results for many sectors as well as GDP growth. Opportunities to buy at attractive prices could arise at that time. Save part of your purchasing power for such chances,” the company said.

Viet Nam's stock market continued to recover in May after having risen sharply in April.

“The VN-Index's performance was better than regional and global markets such as Thailand, China, South Korea and the S&P 500. Average market liquidity, measured by the average daily trading value, reached VND4.4 trillion, up 74 per cent compared to that of January 2020,” VDSC said.

“The stock market in May has increased stronger than our expectations, thanks to the strong participation of domestic investors as well as the lower selling pressure of foreign investors.”

The proportion of the trading value of local individual investors and foreign institutional investors hit 77 per cent and 15 per cent in May, respectively, compared to the average of 72 per cent and 17 per cent.

The demand from foreign investors would mainly come from new foreign exchange-traded funds (ETFs) as these partly solved the current problem of foreign ownership limit, VDSC said.

FUEVFVND, tracking the VN Diamond Index on HoSE, showed its attraction after listing as its assets increased seven times compared to pre-IPO to VND725 billion.

FUESSVFL, tracking the VN Fin Lead index on HoSE, began to attract investors after two months of listing when its total assets doubled in May to VND451 billion.

“We believe factors that have driven the market in the past month or so will remain in June but we see a limited room for the market to grow. We forecast a range for the VN-Index of 830-905. After outperforming regional and global stock markets, the VN-Index nearly caught up with global markets in May.

“Meanwhile, domestic individual investors have started to buy selectively. Our data also shows that the number of new accounts opened in May has begun to slow,” VDSC said.

According to KIS Vietnam Securities Corporation (KIS), the VN-Index is now returning to 900 points.

“This is a strong support resistance when the COVID-19 pandemic broke out in early February, meaning that strong selling pressure would appear at this price,” the company said.

In 2009, money from a governmental stimulus package flowed into the stock market, helping the VN-Index triple from 235 points to 624 points in just nine months.

“At present, although the liquidity may continue to support or even push the market higher in the coming weeks, the VN-Index is unlikely to make a big leap as the market size is now much larger.

“Investment in June is much riskier than that one to two months ago. Investors should be cautious and consider carefully before making new investment decisions this month,” the company said.

According to VDSC, there are still some risks investors need to pay attention to such as escalating US-China tensions and the absence of a vaccine for COVID-19.

“These risks are mainly externalities, which have no direct impact on Viet Nam's economic activities, but may affect market sentiment,” VDSC said. — VNS

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