Markets continuing to sit on the fence

The domestic equity markets early last week reacted positively to rumours the State Bank would lower the base rate in August, closing from the sensitive 500 point level on July 27.

The market, however, on July 28 plunged below 500 points after the State Bank’s official announcement that the base rate would remain unchanged at 8 per cent for August.

Quach Manh Hao, Thang Long Securities’ (TLS) deputy general director, said there were few signs that the domestic stock markets would benefit from the policy change.

“Macro fundamentals look to be unchanged, implying that the sideways market will continue. However, again it shows that the market has been accumulating for quite a long time and waits for a favourable change in macro policies to break out again,” said Hao.

Analysts with Au Viet Securities Company (AVS) added that the recent market efforts for a new bull have failed after rumours of lower prime rates were rejected, indicating that investors sentiments were bearish.

“All macro news for July has been announced, but was unsupportive to market. AVS thinks that the market is still waiting for a macro policy breakthrough from the government and the State Bank,” said Le Anh Thi, an AVS director.

Market analysts said that it was interesting to note the contrast between the unsupportive macro picture and the brighter-than-expected earnings in the first half of this year.

“And in the end of course the macro picture trumps the earnings result because the former is seen as more forward looking,” said Fiachra MacCana, head of research with Ho Chi Minh Securities Corporation (HSC).

Pham Thi Ngoc, Bao Viet Securities Company’s market strategist, said the market also appeared to be indifferent to positive macro economic news and favourable movements of world stock markets.

However, the longer the sideways movement lasts, the higher the risks of short-term investments will be when stock holders are the first to lose patience.

“The VN-Index will likely continue moving sideways and retest at  480-485 points. In this scenario, investors with a medium term view are recommended to disburse gradually,” said Ngoc.