Stocks to fall further as US interest rate hike looms

Stocks to fall further as US interest rate hike looms

The stock market will likely continue its losing streak this week as investors stay cautious ahead of the US Federal Reserve’s meeting. The sharp drop in oil prices during the last three sessions will also be a dampener, analysts say.

The benchmark VN Index on the HCM Stock Exchange fell 0.5 per cent to finish last Friday at 712.21 points. The index recorded a total fall of 0.6 per cent after the last two trading days.

The two-day losing streak also erased all gains the VN Index had made in the previous four-day period. It closed down slightly below the previous trading week’s ending level of 712.62 points.

On the Ha Noi Stock Exchange, the HNX Index rose 0.5 per cent on Friday to close the last trading session at 88.13 points. The northern market index rallied total 1.8 per cent in four days and gained 1.7 per cent week on week.

Last week’s daily average trading volume fell 3.1 per cent to nearly 236.7 million shares, while daily average trading value increased by 8.8 per cent to VND4.18 trillion (US$186 million).

Foreign investors recorded a net sell value of VND131.26 billion in Viet Nam’s stock market, which was a big reverse compared to a net buy value of VND349.2 billion made in the previous trading week.

The fact that the VN Index fell through the level of 715 points showed investors’ sentiment was low as they tried to offload parts of their investment portfolios to avoid upcoming negative effects, analysts at BIDV Securities Corp (BSC) noted.

These effects would be caused by international macroeconomic factors, including the volatility of crude prices and the expectations for a US interest rate increase, BSC added.

“The stock market’s conditions will remain negative this week. The VN Index may recover slightly in the first one or two days, but its general direction is downward.”

Investors will highly pay attention to the US Fed’s meeting this week, in which US officials are expected to raise interest rates for the first time this year.

“As the US employment rate in February was robust on Friday’s report, the Fed will undoubtedly increase the interest rates in the coming decision,” said Nguyen Ngoc Lan, head of brokerage division at the Agribank Securities Company.

There are two scenarios for Viet Nam’s stock market in the case the US central bank decides to raise the rates, Lan said.

If the US interest rates are lifted by 0.25 percentage point, the most expected development, the impact on Vietnamese stocks will be low as investors have all prepared for the decision, she said.

But if they go up by 0.5 percentage point, Viet Nam will see negative impacts on its securities market with foreign investment moving out of the local market, Lan said.

Nguyen Hong Khanh, head of the market analysis division at Sacombank Securities Company, said that the incoming interest rate hike is a certainty and the US Fed is expected to lift its rates two more times this year.

“Increased interest rates will make foreign investors to switch their capital from emerging markets to the US to benefit from higher deposit rates, thus emerging currencies will have to bear a lot of depreciation pressure.”

In addition, energy stocks will weigh down investor confidence following a sharp drop in crude prices after the last three sessions.

bizhub