MBS: Short-Term Adjustment Risks Rise, VN-Index May Retreat Below 1,600 Points by Late August

Long-Term Attractions of the Stock Market Remain Intact

In a recent strategic report,

MBS Securities (MBS)

affirmed that a solid macroeconomic foundation, supportive policies, legal bottlenecks being addressed, a low-interest-rate environment, and the growth of listed companies’ operating profits on the low base of the previous year remain key drivers for the VN-Index’s growth in 2025.

On the macroeconomic front, the manufacturing industry regained momentum thanks to a rebound in new orders, as reflected in the PMI index rising from 48.9 in June to 52.4 in July.

July also witnessed a positive export growth of 16% yoy, while imports increased by 17.8% yoy. Cumulatively, exports and imports grew by 14.8% and 17.9% respectively in the first seven months, resulting in a trade surplus of $10.2 billion.

Regarding domestic policies, MBS expects listed companies’ profit growth to reach 17%/16% yoy in the 2025-26 period in a base case scenario, which includes a slowdown in exports due to the “transshipment” regulations.

In an optimistic scenario, the market’s profit growth in 2025-26 could reach a higher level of 18%/17% if exports perform better than expected due to less stringent “transshipment” regulations. Additionally, Vietnam is moving closer to the opportunity of being included in the FTSE’s emerging market group in 2025.

However, the Market Needs a Breather

According to MBS’s assessment, the market’s valuation is no longer as attractive. The current trailing P/E ratio of the VN-Index stands at 15.3, the highest in the last three years and equivalent to the five-year average.

While the current valuation is lower than that of 2021 when the VN-index was at the 1,500 level and the trailing P/E was 20-21 times, Vietnam’s market valuation is higher than that of some regional countries such as Singapore (14.6 times), Malaysia (14.4 times), and Indonesia (12 times).

From a technical analysis perspective, MBS’s research team believes that short-term adjustment risks are rising. This could be a phase where the VN-Index shows limited movement, but the stock portfolio suffers significant losses, meaning that the index reference may not accurately reflect the performance of most stocks. This dynamic could play out in the coming week.

The market’s support zone is expected to be in the range of 1,566 – 1,588 points. MBS analysts forecast that the VN-Index may retreat to this zone by the end of August.

In terms of trading strategy, MBS suggests that the market may enter a phase where “the index moves in one direction, while the portfolio moves in another”. This is due to the record-high liquidity and substantial gains in leading stock groups, resulting in even faster money flow rotation.

”

Therefore, investors should refrain from initiating new positions in stocks that have already surged. Instead, focus on stocks that are in an accumulation phase and have not yet risen significantly in sectors such as Steel, Power Generation and Distribution, Technology, Industrial Real Estate, Oil and Gas, and Food, among others.

“, the report emphasized.