Stock market expects breakthrough in May

Photo caption — Investors with psychological pressure "Sell in May" effect

Waiting for a breakthrough

Although there has not been much positive information affecting the market since the beginning of May, in the first trading session of the week on May 6, the stock market had a strong increase thanks to leading securities stocks. Accordingly, at the end of the afternoon session on May 6, VN-Index increased by 20.55 points, to 1,241.58 points; HNX-Index increased by 4.56 points, to 232.29 points. The total trading volume of the whole market reached nearly 1,001 million shares, equivalent to a total liquidity value of VND 23,804.75 billion.

However, in terms of the April foundation, the market had a fierce performance with a sharp drop of VN-Index from 1,270 points to 1,180 points. The reason was that the Vietnamese stock market witnessed a lot of negative information. One of them was the tense exchange rate pressure, which negatively impacted the monetary and banking market; at the same time, indirectly promoting the relentless net selling momentum of foreign investors with a total additional sale of more than 5,100 billion VND in the whole market in April.

The VN-Index losing the 1,250-point zone caused the index to lose momentum to form an uptrend, but the increased demand at the 1,160-1,180-point zone also shows that this is a reliable support point. The index is forecast to fluctuate in the 1,150-1,250-point price range to accumulate again and this process will continue after the recent decline.

In May, the world stock market still has many variables to monitor. Recently, the US Federal Reserve (Fed) decided to keep interest rates at current levels for the fifth time and, although warning that inflation is still too high, this institution also rejected the possibility of raising interest rates in June.

With this decision, the current US policy interest rate continues to fluctuate between 5.25 - 5.5%, the highest level in 23 years and will be maintained since July 2023. This also means that the possibility of interest rates not decreasing as soon as expected and this can create pressure on the domestic exchange rate.

In addition, the large cash flow has not yet returned. It can be seen that the differentiation among large-cap stocks is quite common, showing that there is no consensus on the trend, and the time to create a bottom to end the current correction is also unclear.

DSC Market Strategy Director Nguyen Le Nguyen Vi also said that although there is no bad news at the moment, the absorption of previous negative information is enough to force the VN-Index to fall deeper than the old bottom of 1,170 points, due to the lack of momentum to expect a new wave of growth. For example, the yield on 10-year government bonds has broken the long-term downtrend since 2022, meaning that the market's expectation is that interest rates will tend to increase gradually in the coming time. When interest rates increase, high-risk assets such as stocks will be less liquid, and stock market valuations will be less attractive.

In general, Mr. Nguyen Le Nguyen Vi still maintains the view that the recent decline is the best investment opportunity in 2024, but it is necessary to carefully calculate the buying point to save costs and time. With the current macro foundation, DSC is leaning towards the scenario that VN-Index needs more time to balance and accumulate within the range of about 1,170 - 1,250 points; the liquidity level on HOSE is expected to remain low, 10,000 - 15,000 billion VND/session in the next few weeks.

Is “Sell in May” coming?

While the market is lacking positive information, May has added to the pressure of investors about the "Sell in May" effect. Ms. Nguyen Thi Thuy Linh, Director of Analysis and Investment, An Binh Securities Company (ABS), commented that the stock market has had a significant recovery in the first months of 2024 and surpassed the mid-term peak reached at the end of September 2023 in the first half of April. Therefore, the market has made a strong adjustment after increasing for a sufficient amount of time and amplitude.

In May, the “Sell in May” effect is usually due to the market entering a period of relatively little information as most businesses have announced their first quarter business results and full-year plans at the shareholders’ meeting, which has been reflected in prices in advance.

In addition, in the US, the DJI index is currently in a short-term correction state in the context of rising US Treasury bond yields and the USD strength index (DXY). If this state turns into a medium-term correction, it could negatively affect the Vietnamese stock market.

However, Ms. Nguyen Thi Thuy Linh does not highly appreciate the scenario of Sell in May this year due to several factors. Firstly, although the bank interest rate level has shown signs of increasing again, it is still at a record low, supporting the improvement of corporate profits and helping the stock market maintain its attractiveness to investors.

Second, the market has adjusted strongly in April and is trying to rebalance. Finally, the Israel-Iran conflict is under control, the world gold price has decreased and the State Bank of Vietnam (SBV) has sold foreign currency and gold to the market, helping to cool down the exchange rate and domestic gold price.

However, the stock market has not yet entered a real growth phase. Technically, from 2023 to now, the VN-Index has been forming a horizontal structure zone with a medium-term price range of 200 - 240 - 260 points. Therefore, in the short term, corrections may occur with a wide range, especially for stocks that do not have supporting fundamental factors.

With that overview analysis, in May, ABS Research forecasts that VN-Index will fluctuate in the range of 1,130 to 1,250 points. Investors can expect a short-term bottom of the market with short-term increases, but this will be a rather difficult trading period.

Meanwhile, according to Maybank Investment Bank, the market in May will have a better balance than the strong correction period of April. However, May is also a period of information depression, the process of balancing and recovering will take place at a slow pace, not excluding the possibility that there will still be profit-taking pressure in the early stages of May, so the "Sell in May" effect can still occur.

Regarding the lowest point of VN-Index, the price line may have a retest of the previous bottom area of 1,170 points and the highest level in May is expected to be the area of 1,235 points.

Regarding short-term market analysis, Ms. Nguyen Thi Thuy Linh said that investors need to assess whether the VN-Index has adjusted in May and June to decide whether to trade or invest. For now, investors should choose a defensive position and should trade in the short term until a medium-term bullish signal occurs.

Industry groups with positive prospects in 2024 will be those that benefit from government policies, the macro situation, commodity prices, growth cycles or have their own stories... Industries with 2024 business results forecast to grow higher than the general market include: securities, banking, retail, industrial park real estate, rubber, construction materials, exports (aquatic products, construction stones...), technology - telecommunications...

According to Maybank Investment Bank, investors should still be cautious and need more time for market sentiment to "feel stable" if there are some increases in interest rates. Therefore, a defensive strategy will still be the right choice. Technology, retail, securities and banking sectors may be interested.

In addition, most other securities companies also recommend that, during this period, investors should focus on restructuring their portfolios when the market recovers after the recent deep correction; at the same time, reduce the proportion of stocks, only participating in about 20 - 30% of net asset value (NAV) when the market cash flow is still weak as it is now.

Another strategy to consider is to buy good stocks at reasonable valuations to enjoy cash dividends and future price appreciation prospects. These businesses have stable business lines and are less affected by economic cycles.

Ho Chi Minh City Stock Exchange (HOSE) informed that in April 2024, the capitalization value of stocks on HOSE reached more than 4.92 million billion VND, down 5.8% compared to the previous month.

In terms of scores, at the end of the last trading session of April 2024, VN-Index reached 1,209.52 points, VNAllshare reached 1,243.09 points and VN30 reached 1,240.5 points, down 5.8%, 5.3% and 4.4% respectively compared to the end of March 2024. However, compared to the end of 2023, the indices increased by 7%, 7.7% and 9.6% respectively.

In April, except for the information technology industry index (VNIT) and the consumer goods industry index (VNCOND) which recorded growth rates of 5% and 2.1% respectively, the remaining industry indexes all recorded decreases such as the real estate industry (VNREAL) down 9.4%, the energy industry (VNENE) down 6.7% and the industry industry (VNIND) down 6.7% compared to March 2024.

Stock market liquidity also recorded a decrease in April with an average trading volume (VV) of more than 843 million shares/day and an average trading value (VV) of more than VND 21,374 billion/day; down 16.3% in volume and 19.3% in average value compared to March 2024.

Regarding covered warrant (CW) trading, CW market liquidity in April 2024 recorded an average trading volume of over 59.3 million CW/day with an average trading value of VND 45.6 billion/day; corresponding to a decrease of 10.3% in volume and a decrease of 26.4% in average value compared to March 2024.

The volume and value of ETF certificates continued to grow. The average trading volume reached 11.33 million ETFs, equivalent to an average trading value of more than VND 271.1 billion, up 38.4% in volume and 26.6% in average value compared to March 2024.

Regarding foreign investors' transactions, the total trading value of foreign investors in April 2024 reached over VND 89,397 billion, accounting for more than 11% of the total trading value of both buying and selling of the whole market. Foreign investors made net sales during the month with a value of over VND 3,211 billion.

In terms of market size, as of April 26, 2024, there were 568 securities listed and traded on HOSE, including 398 stock codes, 4 closed-end fund certificates, 15 ETF fund certificates and 151 covered warrant codes with a total listed securities volume of over 157 billion securities.

The capitalization value of stocks on HOSE reached more than VND 4,920 trillion, down 5.8% compared to March 2024 and more than 8.07% compared to the end of 2023, accounting for more than 94% of the total capitalization value of listed stocks in the whole market and equivalent to 48.2% of GDP in 2023 (GDP at current prices).

Regarding listing activities, in April 2024, on HOSE, there is 1 new ETF fund certificate stock code listed and officially put into trading of KIM GROWTH VN DIAMOND ETF Fund, stock code FUEKIVND.

By the end of April 2024, there were 39 enterprises with a capitalization of more than 1 billion USD on HOSE, of which 2 enterprises had a capitalization of over 10 billion USD, namely Joint Stock Commercial Bank for Foreign Trade of Vietnam (VCB) and Joint Stock Commercial Bank for Investment and Development of Vietnam (BID).

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