Cash Flow Trends: Is the market signaling a short-term peak?

The trading scale in the last weekend session surged with a total value of over VND 35.1 trillion, but stocks simultaneously reversed sharply. This development coincided with the VN-Index approaching the mid-term resistance level in September 2023…

Experts have shown caution about this change, but they are not pessimistic. The market’s uptrend has been quite long, many stocks have performed well and especially the VN-Index is approaching a strong technical resistance level, so the possibility of profit-taking is normal. The opinions are quite unanimous about the possibility of the market creating a short-term peak, but it is considered a normal adjustment to continue. A more positive view is that the market needs 1-2 more trading sessions to confirm.

However, the estimates of the adjustment risk are not the same. The support zone of 1,180-1,200 points is evaluated by some experts as a level that could be reached in the adjustment phase. Two deeper levels are also mentioned, which are 1,156 points and 1,130 points. The degree of adjustment will depend on the pressure at each moment.

Although the short-term market adjustment probability is highly rated, experts also agree that this does not imply the end of the uptrend from the bottom of November last year. In the medium term, the market will continue to rise and this adjustment is also a normal development. The supporting factors for growth in the medium and long term still exist, such as low interest rates, prospects for macroeconomic recovery, and business results of listed companies.

Nguyen Hoang – VnEconomy

The sudden decrease in the trading session over the past weekend accompanying the high liquidity at a time when the VN-Index is approaching the mid-term resistance level since September 2023… Do you think the market has reached the peak of this uptrend?

Mr. Nguyen Van Son – Analyst of Phu Hung Securities Joint Stock Company

In my opinion, the stock market’s appearance of a sharp decline with increased liquidity when approaching the important mid-term resistance zone in September 2023 is a normal development and not enough signal to determine that the market has reached the peak of the current uptrend.

The main drivers that promote the stock market’s maintaining the medium and long-term upward trend still exist. The story of market upgrade, along with macro factors such as the low-interest rate environment, efforts to promote investment, and credit growth, as well as the prospects of the economy rebounding soon in 2024, are the main factors helping the capital flows into the market more strongly.

Following a series of price increases lasting more than two weeks before and after the Lunar New Year holiday, and when the VN-Index encountered pressure at the “supply zone” at the old threshold level, it is understandable that profit-taking activities occurred, and a strong fluctuation session last weekend was not too surprising. However, the positive point lies in the fact that capital flows participated quite strongly with a trading value of over 30 thousand billion VND, counted only on HoSE, which reflects that the corresponding capital is still abundant.

Therefore, I believe that the sudden decline in the past weekend may just be a technical shakeout session or, even more so, a short-term adjustment, and the main trend of the VN-Index in the medium and long term is still positive.

Mr. Nguyen Viet Quang – Director of Hanoi Branch 3 of Yuanta Business Center

VN-Index approached the old resistance level – this is a strong resistance zone that converges many factors: the old peak in September as well as the 1.618 fibo extension level based on the trend so a strong adjustment period could occur, so I believe that the market is likely to create a short-term peak around 1,240, because there has not been a peak pattern yet, in which case I evaluate this as a short-term adjustment phase to move up again.

Mr. Le Duc Khanh – Director of Analysis, VPS Securities

The old peak level of VN-Index since September 2023 is between 1,242 – 1,250 points and the market, after reaching an important resistance level that cannot be overcome immediately, even if there is a rebound to move around the range of 1,230 – 1,250 points, is likely to continue to adjust.

Ms. Nguyen Thi Thao Nhu – Director of Individual Customer Department, Dragon Securities

Based on the trading volume of the mid-term uptrend wave from November 2023, most investors have strongly invested in stocks at a price range corresponding to the VN-Index 1,100-1,130 and quite coincidentally, this is also the price range of the 38.2%-50% ratio of a Fibonacci retracement. Thus, if based on the probability and technical foundation, I believe that the price range around 1,100 of the index will be a balancing point that the market can touch in this adjustment before preparing for a longer uptrend this year.

Nguyen Hoang – VnEconomy

Foreign investors are having very large net selling sessions, although February has not ended yet, the selling value has been much higher than the net buying value in January 2023. This development coincides with the increasing trend of USD/VND exchange rate in recent days, even equivalent to the peak in 2023. Is this just a normal profit-taking action of foreign investors or is there a risk of a reoccurrence of the situation of capital withdrawal as happened in the previous year?

Mr. Nguyen Viet Quang – Director of Hanoi Branch 3 of Yuanta Business Center

I have been following the net selling activities of foreign investors on the Vietnamese stock market, as well as other emerging markets. In this period, foreign investors have mainly strongly sold shares of the Banking and Financial Services group, which is a group that has increased significantly and brought about huge profits in a short period in the past. Therefore, I assess that the net selling activity of foreign investors is highly likely a normal profit-taking activity when the market, as well as stocks, are in a strong resistance zone. If when the market and stocks adjust to the support zone, foreign investors return to net buying, it will further consolidate this viewpoint.

Mr. Nguyen Van Son – Analyst of Phu Hung Securities Joint Stock Company

As I have shared in previous discussions, I believe that the continuous net selling activities of foreign investors on the Vietnamese stock market, as well as other emerging markets, are part of the trend of capital shifting to the US market and other developed markets in order to catch up with the trend of interest rate reduction of the FED.

From this perspective, the net selling developments in the trading sessions before and after the Lunar New Year holiday, and especially the high increase in the last two sessions, may continue to be part of the shifting trend.

However, I also evaluate that the peak of net withdrawal activities was in December 2023, when at that time there was a series of continuous net selling sessions with a value of nearly 10 thousand billion VND on HoSE. At present, the net selling trend may not end, but the intensity and value of net selling will not be as strong as in the end of 2023.

Therefore, if foreign investors return to net selling in February, the net selling activity will not be as strong as before. And it may gradually cool down in the coming months.

Ms. Nguyen Thi Thao Nhu – Director of Individual Customer Department, Dragon Securities

Due to the stability in the value of VND, the US Dollar/VND exchange rate trend often depends on the fluctuations of the strength of the Dollar. If we look at the trend of this mid-term uptrend wave since November 2023, we can see that the Dollar index decreased in the last two months of 2023 and increased in the first two months of 2024. In addition, central banks around the world are also quite cautious in their monetary policies, so it is really difficult to predict whether the capital flows of foreign investors have significantly shifted in the past or in the short term. In my opinion, the developments of foreign investors on the Vietnamese stock market in the past periods only have a pure trading nature rather than the capital trend of foreigners.

Mr. Le Duc Khanh – Director of Analysis, Chứng khoán VPS

In my opinion, this is probably just a pure profit-taking action – foreign capital still has the ability to return to Vietnam’s stock market this year rather than net selling as in previous years. In February, foreign investors sold more than 3,000 billion VND, while in January, it was only about 1,500 billion. The financial group – especially bank stocks – has increased significantly recently, which can also cause the holding position of large cap stocks in the VN30 group in general and the bank group in particular to change. Adjusting the proportion of stocks held by funds will also be done before the review of the Q1/2024 portfolio takes place.

Nguyen Hoang – VnEconomy

Technically, if the market transitions to an adjustment phase, where do you expect the market to adjust?

Mr. Nguyen Van Son – Analyst of Phu Hung Securities Joint Stock Company

From a technical perspective, the recent session with a downturn, a long candlestick, and high volume, not yet breaking through the supply zone of 1,230-1,250 in the September 2023 peak, implies that the VN-Index may face pressure for adjustment.

However, the fact that the index still stays above the MA20 and 50, which are moving upwards positively, shows that the recent decline only stops at the signal of a technical shake-up or a short-term adjustment, not yet having enough signals to confirm the end of the uptrend formed from the November 2023 bottom until now.

Therefore, I expect that the area around MA20 will be a strong support for the adjustment if the profit-taking pressure continues in the coming sessions, equivalent to the 1,180-1,200 point zone of the VN-Index.

Mr. Le Duc Khanh – Director of Analysis, VPS Securities

I evaluate that the strong support level of the current market is the 1,180-1,200 point zone – the market may only fall to around the 1,200 point area before consolidating back to reach the 1,230-1,250 point zone once again. This development may happen in March.

Mr. Nguyen Viet Quang – Director of Hanoi Branch 3 of Yuanta Business Center

From a technical point of view, I believe that there are 2 strong support zones where VN-Index’s adjustment may react: Zone 1 around 1,156 corresponding to the 38.2% Fibonacci retracement level as well as confluence with the support zone. Zone 2 is around 1,130 corresponding to the 50% Fibonacci retracement level and confluence with the upper edge of the sideways accumulation zone at the end of 2023. These are 2 zones that I will closely monitor and wait for the reaction and signals to end the adjustment and re-participate in capital disbursement.

Ms. Nguyen Thi Thao Nhu – Director of Individual Customer Department, Dragon Securities

If we look at the trading volume of this mid-term uptrend wave, most investors have significantly invested in stocks at a price range corresponding to the VN-Index 1,100-1,130, and quite coincidentally, this is also the price range of the 38.2%-50% ratio of a Fibonacci retracement. Thus, if based on the probability and technical aspects, I believe that the price range around 1,100 of the index will be a balancing point that the market can touch in this adjustment, before preparing for a longer uptrend in the coming year.

Nguyen Hoang – VnEconomy

The market has been quite generous with “gifts” in the 6 sessions after the Lunar New Year holiday. Have you taken profits? How much is the stock proportion?

Mr. Le Duc Khanh – Director of Analysis, VPS Securities

The strategy of profit-taking and reducing stock selling has been implemented during the week. The buying and accumulating operations in the past period will also need to sell in the short-term trading adjustment to reduce the stock proportion held, especially reducing stocks that have increased and met expectations or held too much. My stock proportion is still at 60%.

Mr. Nguyen Viet Quang – Director of Hanoi Branch 3 of Yuanta Business Center

Based on the analysis of the area around the old peak, which is a strong resistance zone with many factors: the old peak in September and the 1.618 Fibonacci extension level that I predict a strong adjustment phase, so I have liquidated all margin parts but still hold stocks in real money because I predict this is an adjustment phase to move up.

Ms. Nguyen Thi Thao Nhu – Director of Individual Customer Department, Dragon Securities

I currently maintain both short-term investment portfolios (for technical trading) and long-term investment portfolios (for fundamental hold stocks). For the short-term portfolio, I have sold most of the stocks in this portfolio due to concerns about an upcoming adjustment in the coming sessions. For the long-term investment portfolio, I still keep the investment value and wait to continue disbursement when the market adjusts as forecasted.

The appropriate proportion at this time is that I keep 50-50 (cash and stocks). With this strategy, I think I can both take profits to have more resources to buy stocks at a cheaper price in the coming sessions and most importantly, I don’t lose the opportunity if the market continues to rise.

Mr. Nguyen Van Son – Analyst of Phu Hung Securities Joint Stock Company

Based on the analysis, the medium and long-term trend of the stock market is still positive thanks to the strong support of the low-interest rate environment as well as the prospects of economic recovery soon in 2024 and the story of market upgrading. At the same time, it is noticed that the decreasing fluctuations may only have technical features or short-term adjustments.

Therefore, during the uptrend that lasted through the Lunar New Year, I only realized profits in short-term positions and short-term surfing to restructure my portfolio. Meanwhile, I still maintain a high proportion of long-term holding positions. With a focus on fundamentally good stocks, parallel to the recovery of the economy, and in line with the benefits of the market upgrading story.