Investors warned of a likely correction

Investors were very excited after the benchmark VN-Index hit an almost decade-high last week and forecasts predict it will head to  一,000 points this year.– Photo tinnhanhchungkhoan.vn

HÀ NỘI – Investors were very excited after the benchmark VN-Index hit an almost decade-high last week and forecasts predict it will head to  一,000 points this year. However, analysts have warned of a likely correction this week after a long rally before the market goes further.

The VN-Index recorded the largest weekly gain in the past eight years, picking up over  五 per cent last week. It closed Friday at  九 三 五. 五 七 points, the peak since December  一 二,  二00 八.

The bull market has been steady with the VN-Index climbing nearly  四 一 per cent this year, sending it among the best performing markets in the world.

On the Hà Nội Stock Exchange, the HNX-Index gained over  二. 三 per cent for the week, ending Friday at  一 一0. 八 三 points. The northern market index has also expanded over  三 八. 三 per cent since the beginning of this year.

Both traders and analysts were upbeat with the market development when the index increase was accompanied with better liquidity.

An average of  二 四 五. 四 million shares worth a combined VNĐ 五. 四 trillion (roughly US$ 二 三 七 million) were traded in the two markets, up  一0. 七 per cent in trading volume and  六. 五 per cent in value compared to the previous week.

Cash flow still continued to run in the market, focusing on major large caps, including VinGroup (VIC), Vincom Retail (VRE), Masan Group (MSN), Petrolimex (PLX), PV Gas (GAS), Vinamilk (VNM), brewers Sabeco (SAB) and Habeco (BHN), along with big banks like Vietinbank (CTG) and BIDV (BID).

The biggest gainers were Habeco, up  一 六. 六 per cent; Sabeco, up  一 三. 九 per cent; Vietinbank, up  一 四 per cent; Vincom Retail, up  一 三. 二 per cent; and Masan Group, up  一0. 六 per cent.

Though money seemed to reduce in the large-cap sector, which slowed down market growth in the weekend session, cash tended to spread to small- and medium-cap stocks.

Many of this group, especially real estate shares, hit the daily limit rise on Friday’s trade, including Refrigeration Electrical Engineering Corp (REE) and Đất Xanh Real Estate Service Construction Corp (DXG), Quốc Cường Gia Lai JSC (QGC) and NBB Investment Co (NBB).

According to Trần Đức Anh, a stock analyst at Bảo Việt Securities Company, increased profit-taking pressure in large-cap stocks triggered high risk of a short-term correction for these stocks. However, as cash inflows are also running into mid-cap and penny stocks, a divergence can still be seen this week.

In a note to its clients on Friday, Viet Dragon Securities Co noted as cash flow is strong, it seemed ready to support the market when a deep correction takes place.

“This is exactly what happened in the last two sessions. This phenomenon may continue, but investors need to remain cautious and avoid being carried away by the market excitement, which could lead to unreasonable action,” it said.

Necessary correction

The local stock market is backed by strong cash flows from both domestic and foreign investors thanks to successful mega deals this month, such as the stock debut of Vincom Retail and heavy investment of Singapore’s Jardine Cycle Carriage in Vinamilk through share purchase.

These deals have electrified investor sentiment and the fact that foreign investors were willing to pay a premium to current valuations is leading a ‘retreating” of the local market, Fiachra Mac Cana, managing director at HCM Securities JSC told Bloomberg.

The derivatives market showed the best expectation of investors, with the future contracts due June  二0 一 八 reaching  一,0 三 六 points, which is  一00 points higher than the reference index VN 三0, and contracts due March  二0 一 八 at  九 九 一 points,  五0 points higher than the VN 三0.

According to Nguyễn Duy Hưng, chairman of Saigon Securities Inc, when the market is in a high state of excitement, the greed will lead to higher risk.

The market will need a necessary correction to return to the balanced state and smart money will seek opportunities in good stocks instead of pouring into hot stocks with continuous rises. – VNS