Bad Signals Still in Sight: Brokers

Viet Capital Securities Co. said both main indices namely VN-Index and HNX-Index witnessed the strongest weekly tumble since May 2011 last week as investors fretted about the market’s uncertain outlook. Worries of possible deflation arose when negative credit growth was reported in the first four months.

Ending the week with five consecutive days of heavy retreat, both markets closed in negative territory despite managing to regain from their intraday lows. The VN-Index lost 7.6 points on Friday to 434.95, erasing 45 points, or 9.4%, from the previous week while the HNX-Index slid 2.33 points to 73.8, down 11.3% from the week earlier.

“After the strong rallies in the beginning months of the year, the markets enter a period where it appears to lack immediate supporting news to sustain the upturn. As such, the markets may move sideways and consolidate for a while before investors regain confidence,” the broker said.

HCMC Securities Co. (HSC) said the market’s correction continued last Friday despite several waves of buying interest which tried to lift prices of high beta stocks. However, Friday is always a tough day to get a rebound with investors preferring to re-invest at the beginning, not the end of a week.

While cash has been coming out of the market for several weeks, it appears that much of it is still being held on deposit, which suggests that cash is still on hand to reinvest in the market at the right time.

The market is starting to look oversold and with the correction already eight trading days old, selling pressure will surely ease off soon. The VN-Index has dropped by 11.7% from the top, which is a very sizeable and sharp correction by any standards, HSC commented.

“Our technical team points out that June and July have often been difficult trading months given the tendency of market volumes to drop off as some investors take holidays,” HSC said in its note to investors.

“We have spoken in the past of a transition between a liquidity-driven market to an economic recovery market over the summer. Hence, our most likely medium-term scenario for the next few months is a range bound market trading between the low of this current correction and the recent highs while we wait for good news. Of course, nothing is predestined so we will just have to wait and see,” the broker added.