Investors should take profits and reduce margins after the recent bull run. Photo: Quoc Tuan

>> The VN-Index could continue to be under downward pressure

The VN-INDEX succumbed to pressure, decreasing by 5.8% after many months of strong growth. VNDirect believes that the market dropped due to steadily rising macro risks. First, the Fed left the door open for future rate hikes in 2023, and the rising yields on US government bonds placed pressure on the VND. Second, the market reacted negatively to the news that the State Bank of Vietnam issued bills to absorb liquidity from the system to support the local currency. Third, investors should take profits and reduce margins after the recent bull run.

Meanwhile, HNX-INDEX and UPCOM-INDEX also decreased sharply by 7.3% and 5.0% compared to the beginning of the month, respectively. Since the beginning of 2023, HNX-INDEX has increased by 12.8%, and UPCOM-INDEX has increased by 23.8%.

Following months of robust growth, real estate shares fell 13.9% in September, becoming the month's worst sector. The bearish market reaction to exchange rate pressure and the US rate cut roadmap has prompted selling to escalate quickly in stocks sensitive to market liquidity, such as real estate and financial services,  or has lately surged sharply in construction and steel. On the contrary, the water and gas supply and oil and gas supply expanded despite weak market conditions, owing to increasing oil prices due to supply concerns. The transportation sector also defied the decreasing trend, owing to expectations that import-export activity would improve by the end of the year.

The average trading value on the three exchanges increased 11.2% mom (85.4% yoy) to 28,624bn VND/session (HOSE: VND25,131bn/session, 12.7% mom; HNX: VND2,387bn/session, 9.0% mom; UPCOM: VND1,105bn/session, -11.3% mom). The stock market continues to draw in cash flow in the context that interest rates are cooling rapidly and other investment channels, such as real estate and corporate bonds, remain unattractive.

Overall, foreign investors speeded up the selling trend in September with a net value of VND3,580bn (16.9% mom) as a firmer USD, causing short-term FII to flow out of Vietnam. Notably, in the last sessions of the month, foreign investors suddenly turned buyers with a net value of more than VND1,800bn when the VN-INDEX index was fluctuating in the 1,130–1,170 range, focusing on SSI, HPG, and DGC. After a net sale of VND3,580bn in September, the cumulative net selling value since the beginning of the year for foreign investors reached VND6,640bn. The proportion of foreign investors’ trading value recovered to 7.2%, compared to 5.9% in August.

>> The VN-Index may continue a short-term downtrend

As of September 25, 2023, VN-INDEX is trading at a P/E of 13.7 times, a 12.5% discount compared to the 5-year average P/E and 7.3% lower than its recent peak. VNDirect believes that the current market valuation has gradually grown more appealing following the recent drop. Besides, the improving earnings in 3Q23 and 4Q23 would wind down valuations to make the VN-Index more attractive. “We forecast P/E forward 2023 of the VN-INDEX at 12–12.5 times, which is an attractive level in the current low interest rate backdrop and favorable for medium- and long-term investment”, said VNDirect.

VNDirect said the VN-Index has successfully remained above the weekly MA200 line, implying that a balance zone will form and accumulation will resume. It anticipates that a cumulative stance between 1,130 and 1,210 will be the market scenario in October.

“The market's risks are centered in two areas: (1) If exchange rate pressure persists, it will weigh on Vietnam’s current monetary policy; and (2) Deflationary threats from China, particularly from the housing sector, may sour investors sentiment toward this industrial group. Thereby, to limit  risky buying, investors should avoid interest rate-sensitive sectors”, said VNDirect.

However, VNDirect said the market would be brewing optimism as the earnings picture in 3Q is likely to improve and market valuation has returned to a more appealing level. Investors might take advantage of the following important trends: (1) Public investment is still the spearhead of economic growth; (2) Import-export prospects are gradually recovering; (3) Following the recovery of the manufacturing sector, retail will recover thanks to improved purchasing power; (4) FDI capital flows remain positive, improving the prospects of the industrial park real estate group. So market correction unveils buying opportunities.