Market likely to correct this week on profit-taking force

Market likely to correct this week on profit-taking force

As the market approaches higher price levels, profit-taking pressure is inevitable, especially after the VN-Index recorded four consecutive weeks of gains.

An investor watches the market's movements. — Photo vietnamplus

The Vietnamese stock market wrapped up last week on a bullish note, with the VN-Index recording its strongest weekly increase in recent months, moving closer to the resistance zone near its historical peak.

Closing at 1,457.76 points, the benchmark VN-Index on the Ho Chi Minh Stock Exchange (HoSE) gained 70.79 points, or 5.1 per cent, over the course of the week. 

This marked the third consecutive weekly rise, underpinned by robust gains across major sectors and strong market breadth.

The recent growth in Việt Nam’s stock market is evident not only in the index but also in liquidity. 

Phan Tấn Nhật, head of analysis at Saigon - Hanoi Securities JSC (SHS), said that trading volume on the HoSE has surged by 41 per cent compared to the previous week, averaging over 1.2 billion shares per session. This figure significantly exceeds the average during the peak period of 2022. 

Notably, foreign investors have continued to shine, with net buying value approaching VNĐ6.97 trillion (US$266.9 million) on the southern bourse.

However, the market is also showing clear signs of differentiation. Capital flows are primarily concentrated in major stocks that wield significant influence.

The market is experiencing strong differentiation, particularly within the Vin-family stocks, steel, banking, securities and large-cap stocks, bolstered by robust net buying from foreign investors. 

In contrast, other groups and mid-cap stocks are under pressure for adjustment, Nhật said.

Explaining the prevailing upbeat sentiment in the market, Pinetree Securities analyst Nguyễn Tấn Phong pointed out several positive supporting factors.

"Investor sentiment this week has been buoyant, driven by numerous favourable announcements. Information regarding tariffs indicates that many countries are facing higher counter-tariffs from the US compared to Việt Nam, JP Morgan has recommended buying stocks in the Vietnamese market and the Prime Minister is pushing for an upgrade of Việt Nam’s stock market to FTSE status this September," Phong said.

Nevertheless, Phong expressed a cautious perspective regarding the nature of the foreign capital flowing into the market, questioning whether this represents a genuine wave ahead of the market upgrade.

"Foreign investors are net buyers, but their focus is primarily on stocks like SSI Securities Corporation (SSI), FPT Corporation (FPT) and Sahabank (SHB), along with some mid-cap stocks. This is somewhat contradictory given that we're approaching the market upgrade," he noted.

The Pinetree expert further emphasised another noteworthy point: foreign ETFs, such as Fubon and Diamond, had very low disbursement levels compared to the overall net buying by foreign investors in the past week. This suggests that the general net buying by foreign investors may not be linked to preparations for the market upgrade.

This analysis indicates that while foreign capital is growing rapidly, its structure and objectives may not fully reflect expectations for a large-scale accumulation ahead of the upgrade narrative.

"This also explains the reality that while the VN-Index is rising sharply, many investor accounts are stagnating unless the right stocks are purchased," Phong added.

Given the current developments, experts agree that the market's short-term trend remains very positive.

Nhật forecasts that the VN-Index may continue to target the 1,480-point range.

However, Phong warns that as the market approaches higher price levels, profit-taking pressure is inevitable, especially after the VN-Index recorded four consecutive weeks of gains. Fluctuations may occur this week as investors collectively take profits.

Despite this, he believes the likelihood of an immediate sharp market reversal is low. 

"To reverse a trend in the medium term, several distribution sessions are needed or the formation of two to three peaks, while the VN-Index has yet to experience any distribution sessions, so the probability of a significant adjustment is not high," he said.

Based on these analyses, experts recommend that investors holding stocks, especially blue-chip stocks attracting capital flows, should continue to hold to optimise profits. 

However, buying into stocks that have surged requires careful consideration to avoid the risk of a short-term peak. Additionally, realising partial profits when the VN-Index and stocks approach strong resistance levels (or historical peaks) is a wise risk management strategy.

"Investors should maintain a reasonable proportion in their portfolios. The investment focus should be on stocks with solid fundamentals, leading positions in strategic sectors and superior growth prospects in the economy. Investors should prioritise following trends, monitor high-price selling pressures and consider realising partial profits if possible," said Nhật. 

Bizhub