Market likely to expand bearish trend: analysts

Investors watch stocks' movements in front of a big screen.

Last week, the VN-Index on the Ho Chi Minh Stock Exchange (HoSE) breached the 1,200-point level after ending the last trade at 1,182.77 points. It lost nearly 120 points just in the last two sessions.

The HNX-Index on the Ha Noi Stock Exchange (HNX) also finished the week at a lower level of 302.39 points.

The market dipped for three out of five sessions.

For the week, the VN-Index dropped by more than 11 per cent, while the northern benchmark HNX-Index declined 12 per cent.

On the southern bourse, trading value increased by 79.9 per cent compared to the previous week to VND84.2 trillion (US$3.6 billion), equivalent to a rise of 92.9 per cent in trading volume to 3.1 billion shares.

The trading value on the HNX also climbed by 70.7 per cent to nearly VND8.3 trillion, with the trading volume up 93 per cent to 406 million shares.

The strong gains were mostly due to the number of trading days as the market was closed for two days in the previous week.

Meanwhile, foreign investors posted a positive week after net buying nearly VND1.69 trillion, of which they bought the most from VFMVN DIAMOND fund with a value of VND646 billion.

Pham Binh Phuong, an analyst of Mirae Asset Securities (Viet Nam), said that selling pressure and cautious sentiment of investors when stock prices rose continued to push the VN-Index to fall further, especially in the last two sessions of the week with a drop of nearly 120 points. Therefore, the downtrend is overwhelming.

Analysts from Saigon - Hanoi Securities JSC (SHS) said that after more than 10 years, the market again witnessed a long losing streak of six weekly falls.

With the bearish trend, the market benchmark VN-Index has evaporated more than 22 per cent in market capitalisation, while the VN30-Index which tracks the 30 biggest stocks on HoSE, also dropped more than 21 per cent in the past six weeks.

After falling for six consecutive weeks, the market's valuation has returned to a very attractive level with the price to earning (P/E) ratio of the VN-Index about 13x and the VN30-Index’s P/E ratio of over 12, which are lower than the average of the last five years.

If based on the forward P/E ratio for 2022, the valuation will become even more attractive. Therefore, this can be considered an opportunity for long-term investors.

Besides, on the technical front, the VN-Index seems to get closer to the target of the theoretical correction of 1,200 points.

However, if the situation becomes more negative, the benchmark can still slip to deeper support levels, with the closest level of 1,100 points.

SHS forecasts that this week, buyers and sellers will become more balanced as the market has dropped to the target area of ​​the correction wave and also does not rule out the possibility that the market will have a recovery week after a long losing streak.

With a combination of market valuation and technical perspective, SHS believes that the area of ​​1,000-1,200 points, corresponding to the VN-Index’s P/E ratio of 11-13x, will be an attractive zone to disburse capital for the long-term investments.

According to analysts, it is rare for investors to be under so much pressure as it’s now when the markets see rate hikes from the US Federal Reserve, the zero COVID-19 policies of China and soaring inflation. Therefore, the business results of the first quarter of enterprises were quite positive, but the stocks continued to hit floor prices.