Brokers Call for Investor Caution

Although the market bounced back strongly on improved liquidity late last week, securities firms advised investors to be cautious as the rally might be short-lived given the continued macroeconomic uncertainty.

Both markets rebounded significantly last Friday with nearly 350 stocks hitting limit-up, recovering all the losses the day before thanks to market speculation on rate cuts. The VN-Index ended the week at 437.38, up 2.43 points, or 0.56%, against the week earlier.

HCMC Securities Co. (HSC) said the market seems to have decided that a greater-than-one-percentage-point interest rate cut is a possibility and therefore have begun to price in that very possibility.

“This current move may carry the market for a couple of more days but of course, if a large interest rate cut doesn’t materialize over the next week or two or if we get just another one-percentage-point cut, disappointment may set in and current gains will likely be quickly reversed. In the best case, we see a mini run taking us part of the way back to the recent market highs,” it said.

“We keep our view that over the medium term, we have entered into a summer consolidation phase. We expect the market to trade in a range between the recent highs and recent lows for up to several months until evidence of an actual economic recovery turn up.

“This could be in the form of accelerated credit growth, lower inventories, an HSBC PMI reading over 50 points, or a pickup in industrial production or retails sales. Once that happens we expect a second and much longer-lived phase of the bull market to begin with the likelihood of much more active foreign participation on this occasion.”

Viet Capital Securities Co. said it is quite possible the market could see some more short-term gains but it remains cautious as bearish sentiment is still overshadowing the market and economic growth remains a concern.

“We would recommend buying DIG, which exactly reached the 50% Fibonacci support measured from the January low to the April peak. At the same time, we can see that a ‘Bullish Engulfing’ pattern was formed along with a positive momentum and price divergence. The stock therefore has 21% upside over the next couple of weeks. We also keep VND, PGS, IJC and VIC for short term as well as MSN and VIC for medium term as we are convinced that in two weeks, the market will be higher than now,” the broker said.