Securities market bullish after bottoming out

Index recovery

An average 99.2 million shares worth VND1.9 trillion (US$81.2 million) was traded on the Ho Chi Minh Stock Exchange (HOSE) during each session of the week.

Since the benchmark VN-Index on HOSE bottomed out at 1,140 points in early July 2022, that week marked the 5th week of the VN-Index's continued upward recovery, surpassing the threshold of 1,260 points, said the Saigon-Hanoi Securities JSC (SHS).

The index ended the week at 1,262.33 points, 9.59 points higher than the previous week, gradually approaching the next resistance zone of 1260-1285 points. Vietnamese shares were forecast to continue their upward trend as profit-taking pressure cools significantly.

According to analysts, foreign investors continued to be net buyers, especially on HOSE, which registered a fourth consecutive week of net buying, reflecting the improved macro context. However, higher interest rates and capital costs may affect businesses, and inflationary pressure will still require investors’ close attention.

From a long-term perspective, the market is still forming an accumulation zone on the basis of low valuation in light of ongoing economic growth providing many investment opportunities.

Investors can consider selectively disbursing and accumulating stocks with growth prospects in the third quarter of 2022, maintaining good business results and earning revenue, and attracting short-term cash flow, SHS recommended.

Mirae Asset Securities (Vietnam) said that the short-term and medium-term uptrend will continue. The nearest resistance level of the VN-Index is the old peak of 1,270 points. However, this securities company noted the important resistance level of the index is 1,285 points.

The VN-Index is under correcting pressure when approaching the 1,265-1,275-point resistance zone, and the market will need more time for stock groups to establish a new price base after recovering from the bottom, according to the Bao Viet Securities Company. Therefore, investors should take advantage of the bullish pulses in the next sessions to sell and reduce stock exposure, the company said.

Market stability expected

The BIDV Securities Co (BSC) July market macro report proposed two scenarios for the VN-Index in August. In the first, the VN-Index will balance at the threshold of 1,200 points, heading to 1,300-1,320 points when liquidity improves and positive sentiment spreads in the market.

“The economy continued to show positive signs in addition to authorities’ efforts to control inflation, promote economic growth, and free up credit capital. The market is forecast to continue to differentiate based on Q2 business results. Well-performing businesses could be cash flow destinations during this period. In this scenario, the liquidity is forecast to fluctuate at US$0.8-1 billion per session,” according to the report.

The second scenario would occur in case of a continued recession in the US and other developed economies, in addition to the slowdown of the Chinese economy as the COVID-19 pandemic develops. In that case, the VN-Index is forecast to fluctuate around 1,200 points.

On the Hanoi Stock Exchange (HNX), the HNX-Index picked up 3.52 points to settle at 303.42 points on August 12. The UPCoM-Index also inched up 1.52 points to 92.84 points.

Other factors of concern to domestic and foreign investors include inflation and interest rates hikes in the US and global recession, which could lead to lower export revenues, a pressure on the Vietnamese dong and weakening domestic demand due to high inflation. According to Dr. Le Dat Chi, Vice Dean of Faculty of Finance, University of Economics Ho Chi Minh City, the banking sector’s positive performance is forecast to continue in the short term, as real estate and corporate bond risks have not materialized.

Do Bao Ngoc, Deputy General Director of Vietnam Construction Securities Joint Stock Company said that with the expectation that inflation will soon peak and the bank will increase interest rates slowly to reduce pressure on the economy, the VN-Index would probably recover significantly in August.