US, China talks may lift market performance

An agreement to halt further escalation of trade tensions between China and the US for at least three months may boost the Vietnamese stock market following the two sides’ meeting during the G20 summit last weekend.– Photo baodautu.vn

US President Donald Trump and Chinese President Xi Jinping agreed at their high-stakes talks in Argentina’s capital Bueno Aires on Saturday that there would be no more tariffs or escalation of tensions on each other’s exports for the next 90 days.

This means the US will not raise its current 10 per cent tariff on US$200 billion worth of Chinese goods to 25 per cent in January 2019 as planned. In return, China will purchase a “substantial amount” of US goods including agricultural and industrial products.

The bilateral agreement was expected to boost global markets, including Viet Nam, in the short term, according to analysts and securities firms.

Trade tensions between the US and China started in late March 2018 when Trump said his administration would place tariffs on $50 billion worth of Chinese imports and accused China of unfair trade and illegal technological and intellectual transfers.

The tensions have had a negative impact on investor confidence and the global economy and equity markets.

Viet Nam’s benchmark VN-Index on the Ho Chi Minh Stock Exchange touched an all-time record high of 1,204.33 points on April 9, but then declined 23 per cent to close last week at 926.54 points.

The minor HNX Index on the Ha Noi Stock Exchange has lost 24 per cent in the same period.

“If the US-China talks during the G20 summit on the weekend come up with a positive result, the VN-Index will advance. This is quite understandable,” Hoang Thach Lan, head of the individual investor department at Viet Dragon Securities Co (VDSC), told tinnhanhchungkhoan.vn last week.

Bao Viet Securities Co (BVSC) also said the US-China meeting would “have significant impacts on the movement of the VN-Index.”

The VN-Index ended down slightly by 0.03 per cent on Friday, totalling a two-day decline of 0.40 per cent, while the HNX Index gained 0.63 per cent to rally 1.58 per cent over three days.

“The VN-Index is at the bottom line of the year” and it’s like a spring that “has been stressed too much and is waiting to burst,” Lan said.

Attractive prices

Recent uncertainties of the global markets about the slowdown of the global economy and rising geographical-political-economic tensions have resulted in low trading liquidity on the local stock market.

Last week trading volume reached nearly 174.2 million shares on average in each session, worth VND4 trillion (US$177.8 million). The figures were down 5.8 per cent in volume and 2.3 per cent in value compared to the previous week.

A large number of stocks had fallen and investors were expecting them to drop further as they searched for bottom-lines, Lan said.

Low liquidity with fluctuating market movements showed investors were being cautious and if their stocks dropped, they were willing to sell them to offset potential losses, he added.

But that also meant they had the opportunity to buy good, undervalued stocks which had a price-to-earnings per share (P/E) ratio of 5-7 instead of striking stocks with a P/E of 15-20, Lan said.

According to Vu Minh Duc, head of research and analysis at Viet Capital Securities Co (VCSC), lower liquidity indicated both buyers and sellers were not ready to jump in the market right now.

“Buyers tend to wait for the market to consolidate when local stocks are priced-in by external factors. Meanwhile, sellers are holding on to their portfolios and waiting for clearer signs from the market,” he said.

“The current market sentiment may signal the indices are near their bottom-lines, offering plenty of opportunities for investors in local stocks, including large-cap groups,” Duc added. – VNS