Stock markets show optimistic signs

SGI

In the first two weeks of November, the economy and the stock market received a lot of positive response in Vietnam and across the world, showing optimistic signs in all stock markets.

Stock markets show optimistic signs

Optimistic signs

DJ stock index (USA) surged high, surpassing the historical peak of 27,600 points, the highest in many years. The main reason is that the US-China trade agreement has moved in a positive direction. Also, the Fed has lowered its interest rate to stimulate economic growth, helping global investor sentiment and increasing cash flow into emerging markets such as Vietnam. Vietnam Stock Index (VN Index) has exceeded 1,000 points, close to the threshold of 1,030 points over a year ago.

Many regional and world stock index have also recovered well, even reached new peaks, showing that investor confidence has returned. US-China trade tension has eased a great deal, when the two countries announced postponing of tariffs and likely offering each other more favorable terms in their next meeting on 3 December 2019. This may be positive information that will support global stock markets.

When Fed lowered the interest rate for the third time to 0.25% at the meeting at the end of October because of lower world economic outlook in 2019, the stock market in Vietnam during this period also received a boost. The PMI index decreased from 50.5 in September to 50 in October, ending the 46-month rising period. However, total retail sales of goods and services in the first 10 months of 2019 were estimated at VND 4,059 trillion, up 11.8% over the same period last year, excluding the price factor which was an increase of 9.4%. In the past 10 months, registered foreign direct investment (FDI) decreased by 16.4% compared to the same period last year, while disbursed FDI increased by 7.4%.

In addition, the interbank USD exchange rate fluctuated in the range of 23,260-23,270 USD/VND, more stable than the amplitude in September. Interbank interest rates of all terms decreased in October. It can be said that Vietnam's macroeconomic indicators are quite positive and this is motivation for the stock market to increase in the year-end period.

World flourishes and Vietnam is stable

The only things experts worry about is the negative impact from world geopolitical risks, US-China trade tensions and Brexit. The central banks, however, have taken steps to loosen in recent months because of fear of an economic downturn in some areas. Operating rates have been simultaneously adjusted lower to a stimulating growth in the year-end period. The State Bank of Vietnam has also reduced 0.25% of operating rate. It can be said that the recovery of Vietnam stock market is reflected by the prosperous movement of the world and Vietnam’s economy.

Vietnam's stock market accelerated recently, when VN Index broke to surpass 1,000-points, which is a very strong resistance threshold that the market has encountered since March.
According to statistics, foreign investors net sold at value of VND 3,152 bn, VND 1,145 bn, and VND 7,041 bn in August, September and October, respectively. This has affected the overall trend in the market, although the demand of domestic investors was evaluated quite well when the general market corrected. However, foreign investor trade has shown signs of reversing since the beginning of November, when they net bought until 12 November, over VND 473.8 bn.

After the period of adjusting and restructuring the portfolio of ETFs in nine months of 2019, FTSE Vietnam and VNM ETFs will likely adjust the proportion and buy large number of VN30 stocks. In addition to increasing the buying proportion such as VHM, VIC, the acquisition of shares from VHM, VRE  is also expected to push the stock market in November and December. The acquisition of major stocks will also cause the VN30 and VN Index to reach new heights.

In general, from the perspective of technical analysis, VN Index is still capable of gaining points to 1,040, 1,080, even 1,100 points by the end of the year. Market trends are still in favor of buying. However, choosing stocks and how to hold is still the most important question for careful investors.

Translated by Francis

Le Duc Khanh Director of Market Strategy, PSI

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