Domestic purchases, earnings hope to drive market: analysts
Domestic capital and corporate earnings-based buying are key to the growth of Vietnamese shares this week amid the shortage of macroeconomic news and prolonged net foreign selling.
Viet Nam’s benchmark VN-Index on the Ho Chi Minh Stock Exchange gained a total of 1.35 per cent last week to 900.95 points, meeting its new three-month high since June 10.
The benchmark index opened last week positively, struggled with the caution and disappointment following the US central bank’s meeting, then soared last Friday with high domestic purchasing power.
Major groups of stocks made gains last week, led by the technology sector and tech firm FPT Corporation (FPT), which jumped total 4.2 per cent after five trading days, according to Sai Gon-Ha Noi Securities (SHS).
Material stocks also rose high with strong performance of steel companies such as Hoa Phat (HPG), Hoa Sen (HSG) and Nam Kim Steel (NKG). Among those, Hoa Sen shares surged total 19.3 per cent during the week.
Other increasing sectors included banking (up total 1.4 per cent), energy and industrials (up 1.8 per cent), financials (up 1.2 per cent), consumer staples (up 1 per cent), and utilities (up 1.1 per cent).
“The market advanced last week with increased trading liquidity to prove the demand is high at the moment,” SHS said in its weekly report. “The market sentiment is highly confident in the market’s short-term outlook.”
As the VN-Index has conquered 900 points, it is likely to keep increasing to hit 910 points, SHS forecast. “But struggles will appear at this level as some investors will try shorting to prepare for potential market volatility.”
“Domestic purchasing power will keep propelling the market in the coming week and keep the market stable at 900 points or more,” Dinh Quang Hinh, VNDirect Securities’ head of macroeconomics and market strategy told Viet Nam News.
“Domestic investors are highly confident as the COVID-19 spread has been controlled in the country to allow the economy and businesses to keep operating,” he said.
“Saving rates at banks are declining and that encourages people to look for opportunities in stock trading, especially when other alternatives such as realty and foreign currency are not at ideal conditions,” Hinh said.
According to the Vietnam Securities Depository (VSD), the number of new Vietnamese trading accounts was more than 28,300 in August, up by nearly 1,200 accounts from the previous month. The total number of new accounts opened in the eight-month period was more than 221,000 – beating last year’s total by nearly 33,000 accounts.
“As there is not much macroeconomic news to look forward to in the coming week, the market sentiment will be driven by Viet Nam’s third-quarter corporate earnings,” Hinh said.
According to VietDragon Securities Corp (VDSC), the second wave of coronavirus has varied the earnings prospects among local companies.
Viet Nam’s GDP growth is estimated at 2.5 per cent in the third quarter thanks to the slight growth of the production and consumer sectors, VDSC said.
The country’s economic growth will get better in the fourth quarter as the Government may have better measures to hasten the disbursement of public investment, and improve the consumer and business confidence, the company said.
Nguyen The Minh, analysis director at Yuanta Viet Nam Securities, said companies having had strong earnings records in the first half of the year will likely keep growing in the second half.
Worth-noticing sectors include consumer staples – led by Masan and related companies, securities – boosted by the strong performance of the stock market, and banking, Minh said.
Though domestic investors remain the key factor to drive the market, they should be prepared for any volatile sessions in the US market, Hinh at VNDirect Secuities Corp warned.
“The US stock market, the most-weighing market in the world, is undergoing some turbulence as investors have been locked in the growth of technology sector,” he added.
Net foreign selling is still a major issue for the Vietnamese stock market and it has weighed on the market for the last six weeks, Ngo Quoc Hung, senior analyst at MB Securities Co, told tinnhanhchungkhoan.vn.
Foreign investors last week net-sold total VND1.24 trillion (US$53.5 million) worth of local shares.
“Investors may be taking a more cautious stance and wait for clearer signals from the US stock market, which may encounter some challenges with the two-month-long US presidential election,” Hung said.
If international markets are not done with their correction stage, it will become a risk for the Vietnamese shares, he said.
If so, investors will choose to stay with mid-cap and small-cap stocks instead of large-caps, thus affecting the growth of the local market, he warned.