Market likely to continue under sell-off pressure

On the Ho Chi Minh Stock Exchange (HoSE), the VN-Index closed the week at 1027.36 points. The index hit the bottom at 962.5 points last Tuesday, a dip of 37.35 per cent compared to the peak of this year at 1,536.24 points. The loss was even worse than the fall caused by the COVID-19 pandemic at the beginning of 2020.

However, bottom-fishing demand in the following two sessions increased as the market's sentiment was lifted after news that the State Bank of Viet Nam had officially raised the operating interest rate by 100 basis points, and authorities and businesses denied all failed rumours.

The HNX-Index on the Ha Noi Stock Exchange (HNX) finished the week at 213.7 points.

For the week, the VN-Index gained 0.7 per cent, while the HNX-Index lost 1.7 per cent.

Liquidity improved slightly, up 8.2 per cent compared to the previous week, with the total trading value on all three exchanges reaching over VND12.64 trillion per session (US$509 million).

Last week, foreign investors kept selling on HoSE, with a net selling value of VND3.6 trillion. In addition, they reduced their net buying value on HNX to VND89 billion, a 40.2 per cent decrease from the previous week.

With a cautious view, experts from the Saigon-Hanoi Securities JSC (SHS) believe that the selling force that weighed down the market was as strong as it was during the crisis caused by the pandemic in March 2020.

Moreover, macro uncertainties related to interest rates, exchange rates, and the bond market make it hard to determine whether the stock market has formed a long-term bottom or not.

SHS advised investors to maintain a reasonable proportion and wait for the general market to stabilise. It is possible to review and update the investment monitoring list again. Investors should prioritise stocks with good fundamentals and high cash proportions in industry groups such as industrial parks, seaports, and energy stocks that are less affected by the current situation of corporate bonds.

KIS Vietnam Securities Joint Stock Company believes that in the short term, the market's sentiment will be more optimistic as the VN-Index surpasses the threshold of 1,000 points with increasing volume. That implies a short-term recovery. However, the bullish signal is not enough to confirm the mid-term uptrend. Therefore, investors must sit on the sidelines and wait for other hints.

Following the sharp fall on October 21, the benchmark indices continued to shrink deeply in the first two sessions of the week as the market reacted to the news on the exchange rate, interest rate, sell-off pressure and some rumours on the market, according to the VNDirect Securities Corporation.

The securities firm said that the market's focus this week will be the policy meeting of the US Federal Reserve, which will take place on November 1-2.

However, the outcome of the meeting may not cause a big surprise and turmoil in the market as traders widely expect that Fed will continue to hike interest rates by 75 basis points. Instead, investors are more interested in the Fed chair's speech on policy direction shortly.

With more evidence indicating that inflation in the US is cooling down, the market expects Fed will not take a more hawkish stance on tightening policy at this week's meeting.

In the domestic market, sentiment may gradually calm down once the bad news has vanished and the most stressful period of the market's liquidity has passed. Therefore, VNDirect expects the VN-Index to accumulate above 1,000 points before a rally to 1,050-1,070 points.

Although the VN-Index reversed the downside and increased slightly last week, the market's risk is still high due to the fluctuations of exchange rates, interest rates, and domestic and foreign monetary policy, the company added.

Therefore, investors should maintain a moderate stock/cash ratio at 70/30 and minimise the use of margin trading to deal with unpredictable situations and reduce risks.

Investors holding a high proportion of cash should wait for more positive signals in liquidity and cash flows before increasing the proportion of stocks.

Macroeconomic stability will be a good foundation for developing the stock market, Deputy Minister of Finance Nguyen Duc Chi said at the Government’s regular press conference on October 29 in Hanoi.