VN stocks expected to decline, hopes rest on banks

The benchmark VN-Index on the Ho Chi Minh Stock Exchange ended last week at 952.55 points, for a total weekly loss of 2.22 per cent.

The HNX-Index on the Ha Noi Stock Exchange fell 0.94 per cent last week to end at 105.86 points.

The VN-Index and HNX-Index have lost a total 2.76 per cent and 1.49 per cent so far in May, respectively.

The Vietnamese stock market experienced strong pressure from international markets last week as investors displayed their concern about the escalation of the US-China trade tensions.

The US on Friday raised tariffs on US$200 billion worth of Chinese goods to 25 per cent from 10 per cent.

Despite positive progress made by the world’s two largest economies in last week’s talks, US President Donald Trump said he would impose higher tariffs on all Chinese goods if the two sides could not reach a deal within one month.

That threat may rattle global financial markets over the next month, and Vietnamese shares are no exception.

The Vietnamese stock market needs some time to calm down, especially as local firms are not supplying corporate news and international markets are highly risky, said Tran Duc Anh, head of macro-economics and market strategy at KB Vietnam Securities.

“Friday’s gain was more like a technical rebound that followed the market’s previous shocking declines,” he told tinnhanhchungkhoan.vn.

“The market will need to fall and settle at a lower level so that potential risks are fully priced in before making a recovery,” Anh said.

Speaking about the trade war between China and the US, Anh said there are two main impacts on the Vietnamese economy and equity market.

The first is the pressure on Viet Nam’s exchange rate, he said. The US dollar will get stronger while the Chinese yuan weakens, so the central bank will bear double pressure in controlling the Vietnamese dong against the two currencies.

“Every time the Vietnamese dong weakens against the dollar, foreign investors net-sell their local assets and pressurise the equity market,” Anh said.

Foreign investors net-sold a total of VND522 billion ($22.3 million) worth of Vietnamese shares last week (May 6-10). They net-bought a total of VND171 billion ($7.3 million) between April 22 and May 3.

The trade war will also re-direct global trade, having an unpredictable impact on the Vietnamese economy and equity market in the long run, Anh said.

“It may deter global economic growth, pull down Viet Nam’s export and hurt the operation of the Vietnamese firms that are in the value chain set up by Chinese and US companies,” he added.

According to securities firms, the trade tensions have dampened investors’ confidence in the market and brought down trading liquidity to a very low level.

Trading volume through order-matching transactions reached an average of 148 million shares in each session.

Investors are waiting for more positive information of the stock market before buying in stocks again, Sai Gon-Ha Noi Securities JSC (SHS) said in its weekly report.

“In my view, the cautious stance would still be the main attitude toward the stock market in the coming week,” Anh from KB Vietnam Securities said.

Friday’s modest gain does not mean all bad news has been overcome and the market will simply bounce back, said Hoang Thach Lan, head of the individual investor department at Viet Dragon Securities.

“My technical indicators remain negative and the market will likely continue its downturn,” Lan said.

Hopes rest on banks

Bank and petroleum stocks are expected to cushion the stock market in the short term, analysts said.

“The banking sector is one of a few industries that showed earnings growth in their Q1 financial reports,” Anh said. “Shares of large-cap banks should be eyed now for the good quality of assets and performance in the next quarters.”

Energy stocks have been boosted by the rise of oil prices since the beginning of the year. However, they should not be a target for the short term as oil prices are likely to fall soon, Anh added.

Analyst Vu Minh Duc of Viet Capital Securities Corp’s research and analysis department said energy stocks are now slightly overvalued while bank shares have become attractive following their recent downturns.