Bottom feeders flag bourses to turn corner

Many investors think the only way is up for the market

Ho Chi Minh Stock Exchange’s VN-Index ended last week at 426.51 points, the lowest level since late July, 2009. For the whole last week, VN-Index lost 15 points or 3.5 per cent against the previous week. Hanoi Stock Exchange’s plunged to below 100 points, closing at 99.10 points on November 19.

The domestic markets ended lower last week after the State Bank tightened monetary policies by hiking base rate by additional 1 per cent point in early November while narrowing the open market operations (OMO) window to just seven days, compared to 14 and 28 days earlier, making the inter-bank rate spark to as high as 35 per cent. 

Market analysts said the market’s crash was similar to early 2009. It is noticeable that the efforts of bottom-fishing by domestic investors have been rising recently, a sign that market will not fall deeper.

Ho Chi Minh Securities Corporation’s (HSC) head of research Fiarch Mac Cana said that markets still dropped, but he saw signs suggesting the markets were not that far off the bottom. “This is due to the fact that the recent chaos on the domestic monetary market is stabilising. The forex market is also gradually stabilising then overnight rates have dropped further to between 9-12 per cent on November 18.”

Retail sentiment has been fragile for some time and a lot of de-leveraging in that segment has been seen over the past few months. However, with rates now moving higher there is simply no incentive to hold in to stock if it has been borrowed against, according to Cana.

“We believe the market is in the final capitulation stage of the current correction and this offers a great opportunity for medium to long term players to pick up stock,” said Cana.

Technical analysts said that the markets had bounced off the August and December 2009 lows [421-427 point range] which established fairly strong support at that level while valuations had been getting cheap.

“The VN-Index is at final correction stage of the five step Elliot wave theory, meaning that the market will form two bottom models. A range of 420-425 points is the most likely scenario. In the worst scenario, the market would plunge below 400 point level,” said Nguyen Xuan Binh, Bao Viet Securities’ senior technical analyst.