Brokers Expect Rally to Continue This Week

November ended as the third worst performing month this year for the VN-Index, which lost 9.5% compared to the previous month. If it had not been for the large amounts of put through transactions, November would have had the second lowest liquidity in the year to date.

However, expectations of interest rate cuts prodded sentiment on the market last Friday, with the VN-Index making gains to close at the intraday high of 383.88 points after four falling sessions.

HCMC Securities Corp. said it saw a little more interest from both domestic and foreign investors. It is noteworthy that State-owned banks have reduced lending rates a little in the past few weeks though interbank rates and bond yields have been rising.

“This is another hint of what will come in the first quarter of 2012 and that’s why we have turned bullish on the market,” the broker added.

Marc Djandji, director of Viet Capital Securities Corporation’s research department, said the performance of Vietnamese equities over the last few months and their current valuations give some level of comfort that most of the bad news has probably already been priced in. Other encouraging points are equities have begun to come within attractive levels and foreign funds finally returned as net buyers in November after three consecutive months of net selling.

The trading band might play a part in restricting the market from reaching its clearing prices swiftly, which exacerbates the downward pressure due to oversupply of stocks, Djandji said.

“Though it may still be too early to see the catalyst for an all-out rally fueled by valuation re-rating as the macroeconomic environment stabilizes, we believe that as markets make new yearly lows, there could be good buying opportunities for medium- to long-term investors. We would recommend that investors who haven’t done so yet, start positioning themselves. We continue to like companies that earn U.S. dollars such as PVD and VHC, but would also look at consumer stocks and companies that have strong cash positions such as VNM, PNJ, and MSN,” he added.

The Hanoi market gained slight ground given three rising and two falling sessions last week, with the HNX-Index inching up 0.53 point, or 0.87%, against the previous week to close at 61.68. The market’s liquidity was sharply higher with the average daily volume of 25.7 million shares worth VND234.4 billion, surging by 23.8% and 21.8% from the week earlier respectively. The market is expected to move up again this week.