Will the Stock Market Explode Next Week After a Deep Circuit Breaker Halt?

After four consecutive weeks of declining points and dwindling liquidity, the VN-Index experienced a positive recovery, closing at 1,635 points—a 2.27% increase from the previous week and above the psychological support level of 1,600 points. The VN30 index also ended the week up 2.57% at 1,871 points.

Market breadth showed a robust recovery, with most sectors rebounding after a period of adjustment and accumulation. Notable gains were seen in insurance, energy, agriculture, retail, securities, chemicals, construction, and industrial zones, where many stocks performed well with active trading volumes.

Overall market liquidity decreased, with trading volumes on HOSE dropping by 21% compared to the previous week, indicating strong divergence. However, improved capital flow shifted towards fundamentally strong stocks with positive business results. A notable downside was foreign investors’ continued net selling, totaling over 2,280 billion VND on HOSE—marking the 16th consecutive week of net outflows.

Many investors are optimistic about the market’s continued recovery after a prolonged period of “holding losses.” In reality, numerous investors report significant portfolio drawdowns ranging from 20% to 30%.

According to Dinh Viet Bach, an analyst at Pinetree Securities, last week’s recovery was fueled by two key developments: the National Assembly’s target of achieving 10% GDP growth by 2026 and positive signals from FTSE Russell and Vanguard regarding investment in Vietnam’s upgraded stock market.

Capital flow shifted noticeably from large-cap stocks to mid- and small-cap sectors that had previously lagged, such as energy, chemicals, fertilizers, and industrial zones. Conversely, previously leading large-cap groups, including VinGroup, banking, and securities, underperformed.

“Despite continued foreign net selling, market sentiment stabilized as the VN-Index recorded four consecutive recovery sessions, closing near 1,635 points. Next week, the market anticipates a Follow-Through Day (FTD) to confirm whether the VN-Index can enter a new uptrend. If this positive scenario materializes, mid-cap stocks are likely to lead the rally,” stated Mr. Bach.

SHS Securities notes that the VN-Index’s short-term trend is recovering and reaccumulating after the recent correction. Key factors to monitor include still-weak liquidity and ongoing market volatility, with potential retests of the 1,610 support level. However, expectations of new capital inflows from investment funds—especially following FTSE Russell’s updated eligibility list post-upgrade—could sustain the VN-Index’s recovery. This presents a favorable opportunity for investors to consider allocation and increased exposure.

Regarding specific stock groups, CSI Securities advises investors to allocate smaller positions during broader market corrections and gradually increase exposure as profits materialize in mid-cap sectors that outperformed last week, such as energy, chemicals, retail, and construction.