After performing quite well in the first trading week after returning from a week-long Tet (Lunar New Year) holiday, market volatility is in focus this week with strong profit-taking possible following the rallies of local stocks.

The benchmark VN-Index on the Ho Chi Minh Stock Exchange on Friday dropped 0.15 per cent to retreat from its four-day rally of total 4.8 per cent, ending last week at 950.89 points – a weekly increase of 4.64 per cent.

The level of 950.89 points was also the index’s two-month high since it reached 952.04 points in mid-December 2018.

The minor HNX Index on the Ha Noi Stock Exchange finished last week at 106.11 points, making a weekly gain of nearly 2.7 per cent.

Banks, property developers, consumer staple firms and petroleum companies were the driving factors of the stock market last week, thanks to their own business results.

Petroleum stocks were pulled up on higher oil prices on global markets. Brent crude last week rocketed by total 7.7 per cent to US$66.25 a barrel.

The prospects of oil prices were forecast to remain upbeat this year as investors were putting hope on the improvement of trade relations between China and the US, the extension of OPEC production cut and lower production by non-OPEC producers.

2019 earnings expectations boosted market momentum for companies in the consumer staple, real estate and banking sectors.

According to the Ministry of Industry and Trade, purchasing power during Tet was up by 10-12 per cent year on year and 15-20 per cent compared to the previous months.

That indicated food and beverage producers on the stock market such as Masan (MSN) and dairy company Vinamilk (VNM) may outperform their earnings forecasts for the first quarter of the year.

As the Vietnamese consumer and retail sectors are on the rise, consumer staple firms are expected to achieve even higher results for the remaining months of the year.

For banks, investors were betting on the restructuring process of financial institutions to deal with bad debts and improve the strength of the Vietnamese financial system, according to VNDirect Securities Corp.

Foreign investors’ net purchase of VND1.9 trillion ($85 million) on the Vietnamese stock market was also a supportive factor in the first trading week of the new lunar year.

According to Sai Gon-Ha Noi Securities Co (SHS), the overall market sentiment was improved to boost the stock indices and market trading liquidity, thus, driving Vietnamese shares to new heights.

But after the VN-Index entered its 950-960 point range after having rallied in the first four trading days of last week, investor confidence turned negative on Friday and triggered strong selling that pressurised local stocks, SHS said in its weekly note.

Bao Viet Securities Co (BVSC) wrote in a report that Friday’s decline indicated “an increase in short-term profit-taking pressure as the indices has approached strong resistance zones.”

Investors were clearly not cautious and hesitant following the market’s hike but recent rallies signalled a possible correction stage for both indices in the coming days, BVSC said.

“Fluctuations are expected in the next trading days” as the benchmark VN-Index would try to break the 955 point level – its current short-term resistance level – and investors’ responses to strong profit-taking pressure would be signals for the stock market’s short-term direction, SHS added.

“The market is predicted to keep increasing slightly with alternate ups and downs” while “selling pressure can still rise early next week” as many stock groups experienced profit-taking pressure last weekend, BVSC said.

“The market will still see wide divergence among stock groups. Large-cap stocks will alternately advance and influence the indices. Cash inflows are projected to keep running into stocks which have yet to rally significantly or are accumulating to gain profits in the short term.” – VNS