Investors look for new drivers after market upgrade

Investors look for new drivers after market upgrade

As the market moves into the final trading week of September and the start of October, investors are set to receive a range of new information, with domestic fundamentals becoming increasingly important following the upgrade milestone.

Investors observe stock performance on a digital screen in a trading room of a securities firm. — VNA/VNS Photo

The stock market closed its first trading week as a secondary emerging market status in negative territory, while foreign investors reversed to net selling, putting short-term market developments under scrutiny as investors look for new catalysts.

On the Hochiminh Stock Exchange (HoSE), the VN-Index fell 1.68 per cent from the previous week to 1,785.11 points. On the Hanoi Stock Exchange (HNX), the HNX-Index declined 1.12 per cent to close at 272.21 points.

Caution remained evident during the first week after the market upgrade milestone, with matched trading volume falling about 20 per cent from the previous week and standing 13.6 per cent below the 20-week average.

Foreign capital also reversed direction. After net buying 107.5 million shares worth over VNĐ2.6 trillion (US$100 million) the previous week, foreign investors became net sellers of 87.8 million shares last week, with the net selling value reaching about VNĐ2.8 trillion.

Lê Đỗ Tuấn Minh, an expert from Kirin Securities (CSI), forecast that selling pressure could remain in the short term and said the market needed more time to find a balance.

According to Minh, the decline in the VN-Index during the first post-upgrade week, together with lower liquidity, reflected continued caution among domestic investors.

Experts from Saigon-Hanoi Securities (SHS) also said the VN-Index’s performance after the upgrade was not as positive as expected. However, they noted that the developments represented only a short-term snapshot in the market’s longer-term process following the change in its status.

Banking stocks continued to account for about 38 per cent of total trading volume across the market. The sector also came under relatively strong selling pressure from foreign investors during the week.

With the third quarter nearing its end and the quarterly earnings season ahead, short-term capital flows could become increasingly selective, depending on the actual earnings prospects of individual companies.

As the market moves into the final trading week of September and the start of October, investors are set to receive a range of new information, with domestic fundamentals becoming increasingly important following the upgrade.

Of particular interest will be economic data for the third quarter and the first nine months of the year. 

Data in the socio-economic report scheduled for release on October 3, including GDP, CPI, import-export data and PMI, will provide further insight into the health of the economy and help shape expectations for the third-quarter earnings of listed companies.

Initial profit forecasts are already showing considerable differentiation among sectors.

For banks, MBS Research forecasts that third-quarter pre-tax profits of banks within its coverage universe will increase about 19.1 per cent year-on-year. 

State-owned banks are expected to show stronger growth, with net interest income forecast to rise 22.1 per cent while provisioning expenses are projected to decline 18.5 per cent.

Global factors could also influence domestic investor sentiment. 

In the US market, September employment data and the personal consumption expenditures (PCE) price index will be key focuses next week.

These data could affect expectations for interest rates, bond yields and the US dollar, influencing capital flows into emerging markets.

In the short term, CSI expects that the VN-Index could test support around 1,740 points and said investors should wait for further signals from capital flows. SHS also maintains a neutral view and advise caution, noting that few sectors have thus far maintained a clear upward trend. 

Bizhub