Stock market trends in Q2 more difficult to predict

Analysts believe that the pressure on domestic exchange rates to increase is expected to last until the second quarter of 2024, before the US Federal Reserve (Fed) officially cuts interest rates.

Vietnamese Dong (VND) liquidity may be more tightly controlled and VND interest rates on the interbank market are likely to increase. This is expected to put short-term pressure on the stock market's upward momentum.

According to ACB Securities Company Limited (ACBS), in April, the stock market received important information, including GDP growth and profit growth of listed companies.

Along with that is the next move of the State Bank on the issue of exchange rate management after issuing about 150,000 billion VND of credit notes.

ACBS assessed that VN-Index is testing the 1,280-1,300 point zone, which is an important resistance zone. Liquidity maintains a positive upward momentum, supporting the upward price movement of VN-Index in the medium term.

However, factors that can restrain the short-term growth of VN-Index are gradually emerging. Therefore, investors should prioritize portfolio risk management during this period, with the expected fluctuation range of VN-Index at 1,230-1,300 points.

According to historical data, the stock market has "plummeted" many times in May. In fact, this is not uncommon in stock markets around the world. According to analysts, the reason for the decline in May comes from the lack of information in the market.

Moreover, there is a holiday in early May, which is also the peak tourist season. People tend to withdraw money from the stock market to serve their personal needs, so the market falls and liquidity also decreases.

In the Vietnamese stock market in April 2022, the VN-Index reached a historic peak of over 1,500 points, then plummeted sharply. Up to now, this index has not been able to recover and is still trying to surpass the 1,300 point mark.

The interbank market interest rate has shown signs of a sharp increase in the past few days, reaching 4.59%/year and has almost reached the interest rate ceiling as regulated by the State Bank of Vietnam (5%). This is the highest interest rate in the interbank market since May 2023.

Interbank overnight interest rates have increased sharply for five consecutive sessions, from 0.28%/year recorded on March 28 to 4.59%/year in the session on April 3, an increase of nearly 15 times in just one week.

Interest rates and the stock market are closely related. Falling interest rates will encourage money to flow into the stock market, while rising interest rates will cause the stock market to fall.

Due to these new developments, analysts say it will be more difficult to predict the stock market trend in the second quarter.

Experts from ACBS said that the US Federal Reserve continued to maintain the operating interest rate at its regular meeting in March 2024 with a consistent message about waiting for more inflation data to decide on the timing of interest rate cuts.

The current market consensus is that the Fed will cut its benchmark interest rate three times in 2024, with the first cut beginning in June 2024. However, the Fed raised its 2024 US economic growth forecast from 1.4% to 2.1%, indicating greater confidence in the economy's ability to achieve a soft landing.

Vietnam continues its policy of macroeconomic stability, maintaining a stable exchange rate and low interest rates to support economic growth. In the first quarter, macroeconomic indicators showed a good foundation, however, consumer demand remained weak and inflation was still at risk.

The positive point is that policies to support the real estate market and the stock market continue to be implemented vigorously, with new steps forward, for example: Roadmap for applying the new KRX trading system, draft to remove pre-funding conditions (investors who want to place orders need to deposit 100% of money or securities in the trading account) for foreign institutional investors.

Experts from ACBS said that the information focus in April 2024 is the USD/VND exchange rate and interest rate trends, VND liquidity; GDP growth in the first quarter of 2024 and business results in the first quarter of 2024 of listed enterprises.

In fact, the Vietnamese stock market was vibrant in the first quarter of 2024. Consecutive trading sessions with liquidity of 1-2 billion USD helped the VN-Index conquer the old peak of 2023 (1,250 points).

According to Mirae Asset Securities Joint Stock Company (Vietnam), bustling trading activities in March continued to push the average daily trading value to a record high of VND26.7 trillion, up 28% compared to the previous month, reaching a peak since January 2022.

The March gains were underpinned by active participation from domestic individual investors, combined with continued positive trading sentiment fueled by consecutive gains over the previous five months.

Specifically, this group bought more than VND 11,100 billion in March, raising the net purchase since the beginning of the year to VND 16,200 billion, marking the largest net purchase month of domestic individual investors since November 2021.

In fact, domestic individual investors are the main driving force behind the general market's growth. However, the fact that domestic individual investors account for the largest proportion also brings risks to the general market. According to analysts, individual investors often have a preference for using high leverage and are easily affected by news that affects their investment psychology. Thereby, it is easy to cause major fluctuations for the general market.

In addition, foreign investors have continuously sold net, causing certain pressure on the general market. In the first quarter of 2024, foreign investors sold net VND 13,872 billion on the HOSE, 50% higher than the net selling value in the whole year of 2023.

Last week, foreign investors net sold 15,681 billion VND in the whole market. This is the 7th consecutive week of net selling by foreign investors.

Foreign investors are not the only ones selling net this year, but the trend of net selling has been present for several years. However, the proportion of foreign transactions only accounts for about 10%, so analysts believe that it does not have much impact on the general market. However, the buying and selling of foreign investors somewhat affects the buying and selling decisions of domestic investors.

In the Report on the implementation of Resolution No. 01/NQ-CP of the Government in the field of finance and state budget in March 2024, the Ministry of Finance said that in the past month, the stock market had alternating sessions of increase and decrease, but still followed an upward trend.

As of March 27, 2024, the VN-Index reached 1,283.09 points, up 2.3% compared to the end of the previous month and up 13.6% compared to the end of 2023. The stock market capitalization reached about VND 6.66 million billion, up 12.2% compared to the end of 2023, equivalent to 65.2% of estimated GDP in 2023.

Currently, the market has 736 stocks and fund certificates listed on 2 Stock Exchanges, 870 stocks registered for trading on the UPCOM market and nearly 7.4 million securities investment accounts.

The Ministry of Finance is continuing to finalize major issues regarding stock market development strategy, restructuring the stock market, and establishing a capital trading floor for innovative startups.

To upgrade the stock market, the Ministry of Finance has actively worked with market rating organizations such as FTSE Russell and MSCI to learn about their market classification criteria and exchange information on efforts from Vietnamese regulatory agencies.

In addition, the Ministry of Finance continues to strengthen management, supervision, inspection and examination of public companies and securities trading organizations to ensure the healthy development of the market. To date, the management agency has issued 116 decisions on penalties in the securities sector, with a total fine of about VND 20,100 billion.