Market likely to continue testing key support zone around 1,770 points

Market likely to continue testing key support zone around 1,770 points

The near-term direction for the market is likely driven less by the second quarter business results and more by macro variables, particularly interest rate levels.

Investors in a trading room of a securities firm in Hà Nội. VNA/VNS Photo

The domestic stock market ended a turbulent trading week with broad-based weakness, extending the downtrend for a third consecutive week. 

On the Hochiminh Stock Exchange (HoSE), the VN‑Index declined 2.24 per cent from the previous week to 1,787.45 points.

Trading activity on the southern bourse also weakened. The average matched volume over the week reached around 651 million shares per session, down more than 1.5 per cent from the previous week. 

Average trading value fell to roughly VNĐ16.5 trillion (US$628 million) per session, down nearly 6 per cent week-on-week and about 17 per cent below the 20-week average.

Analysts said the figures point to large capital staying on the sidelines rather than returning to actively take risk. Trading during the week was short-term rotation among industry groups, while demand for many large-cap stocks remained relatively weak.

Banking, securities, technology and real estate, sectors with major weight in the index, faced significant correction pressure. Some mid- and small-cap stocks saw isolated gaining sessions, but these moves did not provide strong support for a broader market trend.

Foreign trading continued to weigh on the market. Across the three exchanges, the report said foreign investors were net sellers of about 87.1 million shares, equivalent to over VNĐ2.1 trillion. Compared with the previous week, net selling volume increased by roughly 45 per cent, while net selling value fell by around 15 per cent.

On HoSE specifically, foreign investors net sold across all trading sessions, with total net selling volume of more than 88.85 million shares and net selling value of about VNĐ2.2 trillion.

While some market views argued that valuation has become more attractive after the sell-off, potentially supporting a technical rebound, the near-term direction for the market is likely driven less by the second quarter business results and more by macro variables, particularly interest rate levels.

Interest rates are remaining high at many banks, with one bank offering a promotional savings rate of 8 per cent per year for a six-month term, exceeding the interest rate levels shown by many listed banks.

This runs counter to investor expectations that deposit rates would cool sooner to support the economy.

At a recent conference titled 'Removing Bottlenecks, Unlocking Resources, Promoting Growth,' Governor Phạm Đức Ấn of the State Bank of Vietnam said that the central bank's interest rate policy is relatively difficult, because the economy's demand for capital remains very high, while capital mobilisation for the economy is still limited. 

"We focus on economic growth and on credit growth. Therefore, when there is a capital shortage, interest rates naturally rise," he said. 

Sustained high rates pressure valuations across both bonds and stocks. 

In equity markets, higher rates typically increase the discount rate applied to future cash flows, raise the cost of capital and weigh on earnings expectations, leading to generally lower equity valuations.

This was cited as one reason liquidity has not yet bounced back, despite the start of the Q2 financial reporting season showing generally positive results.

In its mid-year 2026 market strategy report, SSI Securities said the market is likely to continue moving within a narrow range. 

One key reason cited was the expectation that interest rates will remain high for longer than previously anticipated, limiting the ability of capital to flow meaningfully into risk assets such as securities.

Saigon - Hanoi Securities (SHS) said the VN‑Index has not yet improved its short-term trend, and may continue testing a key support zone around 1,770 points. 

If that level is lost, SHS said the index could fall further toward 1,750 points. SHS also said investors should maintain a reasonable allocation level, focusing on stocks with solid fundamentals, industry leadership in strategic sectors and growth that outpaces the broader economy.

With liquidity still under pressure and foreign selling continuing, the week's data and commentary suggest a market that is likely to remain defensive into the Q2 reporting period. 

Investors are expected to watch whether interest rate expectations ease and whether money flows improve enough to shift from short-term rotation to a clearer trend. 

Bizhub