Stock market outlook for week 4

Báo Đầu tư•03/03/2024

Stock market outlook for the week of March 4-8: The market is trending towards correction; risk management is necessary.

With a strong upward trend this week, the VN-Index surpassed the 1,250-point mark, but the rally was largely driven by euphoria. The current price level is also close to the peak of August-September 2022, so the market is likely to return to a corrective trend; risk management should be prioritized.

The VN-Index closed February 2024 at 1,252.73 points, up 7.59% from January 2024 (the strongest increase in the past four months). Market liquidity was strong, increasing by 124.2%, with an average trading value of over 23,282 billion VND. This strong liquidity reflects active trading, with a good flow of capital circulating and increasing across different stock groups. Over time, speculative activity also increased.

Note that the average liquidity level is around $1 billion per session, only slightly lower than the periods of August and September 2023 and the beginning of 2022, all of which experienced strong correction pressures in the past.

Another point to note, according to aggregated data from Saigon - Hanoi Securities (SHS), is that in February, individual investors continued to make strong net purchases with a value of VND 6,495 billion, a very large amount in the past two years (only lower than September 2023, October 2022 and March 2022). Considering the average daily net purchase value, this was the strongest net purchase month with only 16 trading sessions in February 2024. The proportion of transactions by individual investors remained high at 84.24%, above the average.

Meanwhile, domestic institutions, which were net buyers of VND 9,500 billion from October 2023 to January 2024, were net sellers in February with a value of VND 3,726.43 billion, accounting for 6.79% of transactions, below the average of 7% over the past three years.

Foreign institutional investors sold heavily in February, with a net selling value of VND 2,328.23 billion, accounting for 8.64% of transactions, above the average, and bringing the cumulative net selling from January 2023 to date to VND 27,212.01 billion. Meanwhile, foreign individual investors also saw a significant net selling surge, reaching VND 440.71 billion.

According to Mr. Phan Tan Nhat, Head of Investment Consulting Team at SHS Securities' Ho Chi Minh City branch, in the short term, the VN-Index is surpassing its 2023 peak of 1,245-1,255 points and will continue to encounter strong resistance levels at 1,280-1,295 points (the peak price in August-September 2022) and 1,300-1,320 points (the peak price in June 2022). It should be noted that historically, the VN-Index experienced a 100-point correction in June 2022, a 300-point correction in August-September 2022, and a 200-point correction in August-September 2023.

Accordingly, in the short term, the VN-Index continues to rise, encountering very strong resistance around 1,275 points, corresponding to the average price of the peaks in August and September 2022 and August and September 2023. With such strong resistance, including the annual resistance and the current market capitalization, these are no longer cheap price levels. Therefore, although the market is rotating very well with many opportunities for rotation on a background of very high liquidity, above $1 billion, as the VN-Index enters these strong resistance zones, there is still a risk of a correction of at least 50-100 points.

According to Mr. Nhat, it should be noted that the VN-Index may experience a strong short-term distribution session with a trading volume of approximately 1.5 billion shares and liquidity exceeding 30,000 billion VND, with a warning sign of a potential surge in trading volume exceeding 800 million shares in the morning session . Therefore, current positions are considered speculative and require risk management, raising short-term stop-loss levels accordingly. Priority should be given to fundamentally sound, leading stocks in their respective sectors, and those with growth potential compared to the overall market.

Overall, the continued retesting of the newly breached resistance zone at 1,250-1,255 points is still likely to recur. Therefore, existing positions can be maintained. As for new buying positions, they should only be entered during corrections in groups of stocks that ensure important trend factors, have attractive upside potential, attract capital inflows, have good fundamentals, and possess significant growth potential.

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