The market is currently characterized by a narrow trading range as the VN-Index remains tightly bound between 1,020 and 1,080 points.

Ongoing challenges

Based on the business results in 1Q23, companies are facing difficulties. Accordingly, net income of listed stocks on HOSE and HNX decreased by 3.2% and 29.9% YoY in 1Q23. In which the net income of the communication services and materials sectors had a higher decline of 91% and 80%, respectively.

In contrast, real estate showed growth, up 48% YoY thanks to VHM (which accounted for around 80% of the industry profit in 1Q23). The slowdown of the world economy has affected the profits of businesses in the period 2022–2022. However, this decline was only reflected in the business data of companies in 1Q23. We expect the business results of companies to not improve in 2Q23.

Meanwhile, the corporate bond market will put pressure on the financial system in the future. Although the market liquidity of corporate bonds improved in March 2023, the issuance value is still low with the high value of corporate bonds due to mature since June 2023, especially from June to August 2023. The value of bond maturity will be VND35 trillion in June, VND42 trillion in July, and VND40 trillion in August 2023. With liquidity in March, it is difficult for companies to raise enough finance to mature bonds.

The real estate industry will be under the most financial pressure when the bond maturity value of real estate is the highest. Accordingly, this sector has a maturity value of around VND120 trillion in the last 7 months of the year, accounting for 44.6% of the total amount of bonds maturing.

Bear or bull market?

The market is currently characterized by a narrow trading range as the VN-Index remains tightly bound between 1,020 and 1,080 points. This indicates a short-term sideways trend. Additionally, there has been low trading volume and value, accompanied by relatively flat and significant moving averages. These factors serve to reinforce the current trend.

However, Kis Vietnam’s view, to confirm either an uptrend or a downtrend, VN-Index must experience a breakout above the upper band at 1,080 pts or a breakdown below the lower band at 1,020 pts. It is important to note that in the bullish scenario, any potential uptrend may face instability due to selling pressure emerging at higher price levels, particularly within the range of 1,100 to 1,120 points.

Vietnam's stock market would demonstrate a recurring 3-year cycle, where significant bottoms are formed at three-year intervals. Presently, the market is in the seventh 3-year cycle, which commenced with the bottom in 2020 and is expected to culminate with an ending bottom between September 2022 and September 2023. However, there is a possibility that the bottom reached in November 2022 could also be the bottom of the seventh 3-year cycle, owing to the strong uptrend observed since November 2022.

In Kis Vietnam’s opinion, there are two key features supporting this possibility. First, the index has recently surpassed and closed above the 125-period moving average on the daily chart, suggesting that the November 2022 bottom may represent a 1-year cycle bottom. Second, the decline from the April peak to the November 2022 bottom amounts to 40.3%, which aligns closely with the average historical decrease. Consequently, two scenarios may unfold:

In the bullish scenario, the bottom reached in November 2022 is considered the bottom of the 3-year cycle. Although the formation of the 3-year cycle bottom occurs earlier than expected, it remains within the allowable time frame. Consequently, the uptrend that commenced in November 2022 would represent the first one-year cycle within the larger 3-year cycle. The subsequent bottom is projected to form between September 2023 and January 2024.

However, it is important to note that the index has yet to close above the 375-period moving average on the daily chart, which is used to confirm the November 2022 bottom as the 3-year cycle bottom. Therefore, a strong uptrend is needed to breach this line in 2023. As a result, the price target in this scenario could surpass the threshold of 1,220 points.

As for the bearish scenario, this scenario suggests that the bottom of the seventh 3-year cycle has not yet been established. Under this scenario, the VNIndex is anticipated to experience a swift correction, leading to the formation of another 3-year cycle bottom. Kis Vietnam expects this bottom to materialize between May 2023 and September 2023, as the previous 1-year bottom occurred in July 2022. Furthermore, the upcoming 1-year bottom may be equal to or lower than the trough witnessed in November 2022. This implies a target price range of 780–910 points for the next 1-year cycle's bottom (further details can be found in the January month's strategy report). Following the expected bottom between May and September 2023, a new trend will emerge, possibly an uptrend, initiating a long-term upward period.