The Vietnamese stock market has experienced a volatile trading week. A sudden 21-point drop in the last trading session wiped out all previous recovery efforts, with the VN-Index closing at 1,247 points. It is noteworthy that the trading volume in the last trading session on HOSE set a 7-month record, pushing the weekly average trading volume to 25,400 billion VND.
The sudden reversal of the index in the last trading session, coupled with a sharp increase in trading volume, has led experts to agree that the market has shown enough signs of a typical distribution session. The possibility of the VN-Index entering a short-term correction phase and the risk of falling below the support level of 1,200 points need to be considered.
However, the long-term upward trend of the market has not been broken and a large amount of money is still shifting into the stock market. Therefore, this is still a good opportunity for investors with a long-term vision to accumulate stocks.
VN-Index enters a short-term correction phase
Mr. Tran Truong Manh Hieu, Head of Analysis at KIS Vietnam Securities Company
The strong correction pressure on the market comes from several factors: (1) Profit-taking pressure as the market has been rising for 4 consecutive months without significant corrections. (2) The exchange rate is trending upward and approaching its historical peak, which creates significant pressure on some fundamental factors. (3) Foreign investors have been net sellers in recent months, with net selling in 10 out of the last 12 months, and if the net selling continues for a long time, it could create significant pressure on the overall market. (4) Capital is being withdrawn from funds (investment funds in Vietnam, including active and passive funds), and this capital has been strongly withdrawn over the past 3 months. In addition, experts believe that investor sentiment is also influenced by some negative rumors.
Assessing the sudden surge in trading volume in the last trading session, experts believe that based on technical analysis, a strong correction session accompanied by an increase in trading volume is a signal of a reversal in the trend. With the distribution phase having taken place, the market may enter a short-term technical correction.
However, Mr. Hieu also noted that a short-term technical correction is not a reversal point for the medium and long-term trends. The index will not undergo significant corrections but will consolidate at a new price level and then continue to rise for the remainder of 2024. Therefore, the possibility of the VN-Index falling below the 1,200-point support level is very low.
With the view that the market will go through a correction phase and then resume growth for the remainder of the year, investors can take advantage of this correction phase to accumulate stocks in their portfolios for profit opportunities.
Different investor groups will act differently. For fundamental investors, this is an opportunity to accumulate good stocks for medium and long-term positions. For short-term investors, it is advisable to reduce the proportion of stocks to a safe level at the current time. Wait for the market to form a new price range and resume buying when there are signs of a return to growth.
The risk of falling below the 1,200-point threshold needs to be considered
Mr. Nguyen Anh Khoa, Head of Analysis and Research Department at Agriseco Securities Company
In the context of the market recording a strong upward trend since the beginning of the year, the emergence of many concerns amid complex exchange rate movements and continuous net selling by foreign investors and proprietary traders has had a negative impact on the sentiment of many investors. In addition, from a technical point of view, (1) VN-Index has repeatedly failed to break through the important resistance level around 1,280 points and (2) RSI on the daily chart has shown a bearish divergence signal, making bearish investors lose patience and increase profit-taking pressure in the last trading session.
The sudden reversal of the index in the last trading session, coupled with a surge in trading volume, indicates signs of a typical distribution session. At the end of the session, the VN-Index closed at its lowest level of the day and formed a Marubozu candlestick pattern, indicating an expanding risk of a correction phase. In the past 2 weeks, the index has had 5 distribution sessions, increasing the risk of a reversal in the medium-term trend.
Regarding exchange rate pressures, based on the observation of experts, the sharp rise in the exchange rate usually has negative effects on the stock market. The USD/VND exchange rate is currently trading around the peak of 2023 and the VND has depreciated by about 1.8% against the USD since the beginning of the year (partly due to the recovery of import demand for production materials). In the context of the stock market, represented by the VN-Index, having risen more than 10% since the beginning of the year, combined with tension in the exchange rate, this could significantly increase profit-taking pressure.
Although the risk of an expanding correction phase in the short term still exists, the support level around 1,230 (+-5) points, corresponding to the MA20 on the daily chart, is expected to play a significant support role and the index may experience a technical rebound from this level. However, if the index does not successfully overcome the 1,250-point resistance level and then falls below the 1,200-point threshold, the risk of a decline needs to be considered.
With the downward momentum of the index in the past week mainly coming from large-cap stocks adjusting after a steep rise, experts at Agriseco believe that “differentiation” will continue to be the dominant trend in the market next week. With the current upward trend still playing a leading role in the medium term, investors are advised to increase the proportion of short-term trading positions, prioritize stocks that are already in their portfolios, and stocks that have been trading near the accumulation price range. However, it is important to avoid chasing stocks during bull market phases and prioritize risk management for the portfolio as a top priority in the scenario of the mentioned support level being broken.
Don’t panic and sell stocks
Mr. Dinh Quang Hinh, Head of Macroeconomic and Market Strategy Department at VNDirect
Observing the buying power at the support level of 1,230 points (+/-10 points): There has been a strong profit-taking pressure as the VN-Index failed to break the significant resistance level of 1,280 points in the last trading session. Selling pressure has been coming from the banking stock group, which has been leading the market’s recent rise, and gradually spreading throughout the market. Selling pressure increased towards the end of Friday’s session, causing the VN-Index to fall below the 1,250-point level.
Although the market experienced a sharp correction in one trading session, experts at VNDirect believe that investors should not panic and sell stocks. In fact, the upward trend of the market has not been broken as the VN-Index is still trading above the MA20. In addition, concerns about exchange rates and interbank liquidity have shown signs of easing.
