Market awaits upgrade news this week

Market awaits upgrade news this week

The upcoming decision from FTSE Russell is anticipated to play a crucial role in shaping the market's trajectory.

Investors watch market's movements on a trading floor of a securities. VNA/VNS Photo

The Vietnamese stock market wrapped up the first trading week of the fourth quarter lacking any significant momentum, marking its third consecutive week of declining liquidity. Meanwhile, investors' attention shifted to the FTSE Russell announcement at the end of this week for their moves.

On the Ho Chi Minh Stock Exchange (HoSE), the VN-Index finished last week at 1,645.82 points, while the HNX-Index on the Hanoi Stock Exchange (HoSE) was last traded at 265.75 points.

For the week, the former lost nearly 0.9 per cent and the latter dropped 3.7 per cent.

Although the VN-Index maintained the psychologically significant 1,600-point threshold, the benchmark index has shown a prolonged sideways trend for over a month, struggling to break through the strong resistance around the 1,700-point level.

The week’s trading activity highlighted a clear absence of driving forces. The index was supported by a few large-cap stocks, particularly Vingroup (VIC), which contributed over 12 points to the Index. 

Without VIC, Vincom Retail (VRE), Gelex Electricity (GEE) and LPBank (LPB), analysts suggest the index could have fallen to the 1,620-1,630 range.

Liquidity continued to decline for the third consecutive week, with average trading volume on the HoSE dropping to 814 million shares per session, down 10.6 per cent from the previous week. This decline reflects investor caution, as short-term loss pressures increase and capital flows weaken following a previous hot phase.

The week also revealed a clear divergence in capital flows. Real estate and public investment stocks, which had previously surged, faced significant profit-taking pressure. 

Conversely, there was a notable return of capital to the banking and securities sectors, particularly in stocks like Sacombank (STB), MBBank (MBB) and Techcombank (TCB). 

However, this rebound was swiftly countered in the final session of the week as demand weakened, highlighting the unsustainable nature of the recovery.

The most significant pressure of the week, and a key factor overshadowing overall market sentiment, came from heavy capital withdrawal by foreign investors. 

Over five trading sessions, foreign investors sold a net total of nearly VNĐ7.6 trillion (US$287.5 million), with HoSE accounting for over VNĐ7.2 trillion.

The trend of foreign net selling is not unique to Việt Nam, as many emerging markets are experiencing similar patterns.

This week is critical for the domestic stock market, as FTSE Russell is set to announce its evaluation results for Việt Nam’s market upgrade on October 8. 

Ahead of this pivotal moment, the Ministry of Finance has confirmed that it has completed all necessary measures and is prepared for the potential upgrade, awaiting an objective assessment from international organisations.

During a regular press briefing for third quarter, Deputy Minister of Finance Nguyễn Đức Chi said that the ministry and the State Securities Commission (SCC) have proactively collaborated to provide information and evidence to ensure a transparent and objective evaluation of the market by international agencies.

Chi emphasised that the final decision rests with the international organisation, but Việt Nam will continue to work closely to build trust and facilitate the upgrade process. 

"The upgrade is not a one-time goal but a continuous process that needs to be sustained in the long term, he said.

"The ultimate aim is to develop a stable and transparent stock market that effectively supports the economy, businesses, and medium- to long-term capital markets."

According to Pinetree Securities, if Việt Nam is not upgraded, the market may face a medium-term correction lasting several months. Conversely, if an upgrade occurs, the VN-Index could see a breakout, but a strong return of capital, especially in the banking sector, is essential to surpass previous peaks.

In light of declining liquidity and ongoing foreign selling pressure, the market is in need of a strong catalyst to break out of its current sideways trend. The upcoming decision from FTSE Russell is anticipated to play a crucial role in shaping the market's trajectory. 

Bizhub