Vietnam - Brokers say short-term risk remains high

HCMC – Although the VN-Index shows short-term buying signals after staging a nice recovery last Friday, the market is expected to continue moving sideways with low liquidity this week as investors are still concerned about high risks.

HCMC Securities Corp. (HSC) said last Friday’s rebound suggested that sentiment was starting to recover from worrying news last week. Indeed, banking stocks such as ACB and EIB made gains, indicating that recent steps taken by the boards of directors were being broadly welcomed by investors.

Both indices soared on remarkable spike in volumes, especially toward the end of the afternoon session. At the close, the VN-Index rose 1.59% to close at 395.48 points and the HNX-Index surged by 2.32% to close at 56.71. The combined turnover surged 73% against the previous day to nearly VND2 trillion.

However, the VN-Index compared to the previous week still lost a slight 3.39 points, or 0.85%, due to sharp decline on Tuesday and Thursday while the HNX-Index retreated 4.25% with up to four falling sessions.

HSC said that the mid-term trend for the VN-Index remains ‘neutral’. The significant support area is still at around 380 points and the VN-index has hold well above this over the past four weeks.

The market is expected to move in a close range from 380 points to 410 points over the next two or three weeks. However, the mid-term trend could be downgraded to ‘down’ should the VN-Index moves below 380 points, it said.

Meanwhile, Viet Capital Securities Co. (VCSC) said that last Friday marked the final trading session before the FTSE Vietnam Index ETF (exchange traded fund) and Van Eck Market Vector ETF apply quarterly constituent changes. The broker noted wild price swings on affected stocks such as HSG, PGD, SBT BVH, HAG and VCB.

ETFs are becoming “leading” indicators rather than tracking indices with retail investors anticipating and making trades based on these quarterly reviews, VCSC commented.

“While we think that ETFs are good for the market, being a source of increased liquidity, fundamentally speaking, we do not recommend an investment strategy based solely on inclusion or exclusion in indices. Most likely we will not see robust trading like this again, at least until the next quarterly revision,” it said.

“It will be interesting to see what next week brings as the overhang on several bank stocks remain mysteries. If there is anything we are certain of, it is that investors fear uncertainty. We think Friday’s enthusiasm may be quite short-lived as things get back to normal after this quarter’s ETFs rebalancing,” the broker added.

Phuong Thao - The Saigon Times Daily

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