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Shares not ready for stable growth on concerns over persistent risks

A three-day rally does not mean Vietnamese shares have returned to the growth track as risks are still persistent and there is no clue they have faded away, experts have said.

 

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A street with very few people in Ha Noi on April 2. The social-distancing order, starting on April 1, will end in 10 days but it remains uncertain whether local businesses can stand as the coronavirus pandemic is clearly weakening market demand. 

 

Viet Nam’s benchmark VN-Index on the Ho Chi Minh Stock Exchange has rallied a total of 6 per cent in the last three days to finish last week at 701.80 points.

The VN-Index made a weekly gain of 0.82 per cent and it has bounced back significantly by 6.46 per cent from a 3 ½-year low of 659.21 points on March 24.

The rally of the market clearly enhances the market sentiment and maybe some investors are looking forward to a stronger recovery, even in the short term.

But reality may destroy those believers as the global markets are quite vulnerable at the moment.

Sai Gon-Ha Noi Securities Co’s deputy director of market analysis Ngo The Hien said trading liquidity in the last three days was lower than that made before.

“It proves the VN-Index has only had a technical recovery and it will head to the short-term target of 730 points.”

Vietnamese shares have moved up because global markets are now in their short-term uptrends, Nguyen Anh Khoa, director of analysis and investment consultancy at Agribank Securities Co, told tinnhanhchungkhoan.vn.

“But I don’t think the recent rally can last long as foreign investors are still net-selling on a large scale and the VN-Index itself is approaching the short-term resistance of 720-730 points,” Khoa said.

Foreign investors last week offloaded a total net value of VND1.2 trillion (US$51 million), down 20 per cent from the week before.

Since January 30, foreign investors have sold a total of VND12.8 trillion worth of Vietnamese shares.

“Investors will likely sell out to earn profits in the resistance zone and the market sentiment may reverse easily,” he said.

Analysts’ worries may come from the fact that coronavirus and the global pandemic caused by the virus, called COVID-19, have not been totally controlled.

The number of new infection cases continues rising each day. On Sunday, there were more than 14,200 new cases, raising the total number to more than 1.2 million cases, according to worldometers.info.

Viet Nam on Sunday reported the 241st case and a total of 91 patients that had fully recovered.

The social distancing order, which came into effect on April 1, will end on April 15. It remains uncertain how local businesses will recover after the next 10 days as the virus will still weigh on both domestic and global economies.

“Most investors believe the market will soon decline,” Sai Gon-Ha Noi Securities Co (SHS) said in its daily report. “News on the COVID-19 pandemic will be the key factor to investors at the moment.”

Agriseco’s analyst Khoa said the domestic market may rise only if a vaccine is created to contain the virus and the pandemic is under control.

“It takes time to produce a vaccine for the virus. So now investors will look to the total number of cases in key markets such as the US and Europe while they are counting that Viet Nam will have a successful 15-day period of social distancing,” he said.

“Then the market will settle down and recover. The economy is surely hit by the pandemic this year, but it can be offset by stimulus packages for public investment, and business and labour assistance.”

The Vietnamese Government is expected to announce a VND36-trillion support package for labourers and poor people that have been hit by COVID-19.

On a global scale, governments and central banks have also announced trillions of dollar worth of financial stimulus for their economies, hoping companies would be strong enough to stand until the pandemic is over.

At the moment, companies have not given any hints about their earnings in the first quarter and forecast for the whole year, according to Vu Minh Duc, director of market research and analysis at VietCapital Securities Corp (VCSC).

“The slow disclosure of such information may make investors unable to assess the prices of stocks and the future movement of the market,” he said.

The market will return to its positive track when a majority of investors feel shares have fallen to very cheap price levels and they find opportunities in local assets, he added. – VNS

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