VN-Index struggling through critical point

The markets have become a hostile place for some investors, but a change in fortune may be just around the corner

The Ho Chi Minh Stock Exchange’s (HoSE) VN-Index closed last week at 439.94 points, regaining some losses after the market plunged to 420 points, the lowest level for 18 months.

Analysts with PetroVietnam Securities Incorporated (PSI) said the VN-Index technically recovered from the 420 point mark with the strong support buying by foreign investors. The 420 level has been tested three times within 18 months, but then recovered.

“The market’s liquidity is falling, a sign that investors are waiting for higher prices to dump stocks. This is the risk,” said Phan Thanh Binh, PSI chief analyst.

Transaction volumes actually increased in the last two trading days of the week, with HoSE seeing nearly VND1.1 trillion against the VND683 billion marked last Monday.

While acknowledging last week’s improved liquidity might point to the possibility of market recovery in the short term, market observers remain cautious about the increased selling pressure  as market prices rise.

Binh said high inflation continued to be the biggest threat to the market’s medium to long-term outlook.

However, Nguyen Duc Thi, Bao Viet Securities Company’s (BVSC) market strategist, said investor confidence had stabilised and selling motivation seemed to have been eroded as Vietnam’s equity markets were relatively low and negative news had been priced in.

Therefore, Thi said, without unexpected negative factors, the market was likely to stabilise or recover in the short-term.

“BVSC recommended buying in and accumulating stocks for investors with long-term strategy and healthy financial capacity,” said Thi.

Tri Viet Securities Company analysts added the new valuation has been set at 420 points and November’s inflation had been priced in. The 420 point level was a good buying opportunity with few risks, said Tri Viet analysts.

Analysts with Ho Chi Minh City Securities Corporation (HSC) said uncertainties have dominated investor sentiment over the past months and have not disappeared. The local currency is still under pressure and November’s consumer price index figure is a worry and with banks now competing for deposits by offering more attractive rates.

“All in all it is not the friendliest environment for equity investors and it is difficult to assess short-term risks at this stage,” said HSC head of research Fiachra Mac Cana.

On the other hand, HSC saw reasonable valuations with a large number of cases stocks becoming cheaper, said  Cana.