In the recent investment strategy report for October, Rong Viet Securities Company forecasts that after a period of stronger and more positive growth than other markets in the region, the Vietnam's stock market will enter a correction period to support a sustainable uptrend.

A prudent investment strategy is appropriate in the current period 

Vietnam's stock market saw sharp growth in August and September and achieved better results than other stock markets in South Korea, the US, and Thailand. This movement has partly reflected positive information on Vietnam's GDP growth in the third quarter compared to elsewhere.

Specifically, Vietnam ranked first in Southeast Asia in economic performance with positive GDP growth (2.12%) in the third quarter while other regional countries were projected to have lower or negative GDP growth rate. Another noteworthy factor that increases the correction of the VN-Index is the announcement of business performance in the third quarterof all listed stocks in October, as per Nikkei Asian’s report.

Experts worry the "sell at information release” effect will put pressure on the VN-Index as a number of VN30 stocks (the decisive stock for movement of the VN-Index) increased strongly in August and September before rumours about positive business performance in the third quarter of 2020 and private placement to strategic shareholders, especially stocks impacting the VN-Index such as banks.

According to Rong Viet Securities Company’s experts, the performance of banking stocks in the third quarter of 2020 will not be as negative as forecast, especially private banks like VPBank, HDBank, TPBank and Techcombank after being approved by the State Bank to extend credit limits to 20%.

Recently, the State Bank announced a decision to reduce the operating interest rate. However, this is expected not to have a significant impact as some banks have lowered their interest rates before this information. The Vietnam’s CDS 5Y index has tended to rise recently, showing the possibility of a correction is quite high when the two figures often had opposite movements.

The negative reaction of foreign investors was also a notable factor as they continued to net sell strongly through order matching transactions for four consecutive weeks of September. In terms of valuation, the PE of VN Index is not too attractive for cash flow (15.1 times on September 30, when it is higher than thatwas before the Covid-19 pandemic in Vietnam (14.5 to 15 times from January to February).

From the above factors, Rong Viet Securities Company believes the market can move sideways in the context of continuous net selling by foreign investors and the "sell at information release" effect when listed companies announce their business performance in the third quarter in October. On the other hand, unpredictable movements of the global stock markets caused by the US presidential election, the new economic stimulus package in the US and the pandemic have not shown any positive signals for the VN-Index. Accordingly, the VN-Index can fluctuate in the range from 865 to 920 points.

Rong Viet believes that a prudent investment strategy is appropriate in this period when the prices of many stocks may have reflected the business performance in the third quarter of 2020.

Accordingly, investors should take profits in gaining sessions and wait patiently for corrections to disburse into stocks with more positive movements in business activities in the end of 2020.