What to expect for the stock market in May?

For stock investors, May is always a sensitive month because of the market cycle as well as a number of political and economic upheavals that impact short-term investment trends.

Three events this year have made May even more noteworthy: the FOMC meeting, tariff deals between the US and Vietnam, and the launch of the KRX trading system, which represents a major shift in market architecture.

Vietnam and the rest of the world are currently keeping a careful eye on the progress of the tariff deals between the United States and its trade partners. Every nation develops its own plan and keeps track of the agreements it has signed for reference.

The saying "Sell in May and go away," which comes from historical data of the U.S. stock market, is also frequently shared by the stock market.

For many years, results from May to November have frequently been significantly lower than those from November to April. According to VNDirect experts, this narrative holds some truth for the Vietnamese market as well.

We saw a lot of stock market-supporting activities in April, including new listings, dividend payments, Q1 earnings reports, and annual shareholder general meetings. However, a period of "information drought" will begin in May, leaving the stock market unsure of its direction. In the meanwhile, only stocks with favorable information can break through because information is always a significant catalyst.

Although it is quite likely that the Fed will keep current interest rates at its FOMC meeting on May 6 and 7, 2025, a rate cut could be discussed at the June meeting. This is thought to have an impact on Vietnam's monetary policy.

The formal debut of the KRX trading system was one of the highlights of May. After years of development, this project is now prepared for operation. According to Mr. Nguyen Xuan Thinh, VNDirect analyst, KRX would significantly alter trading practices in the Vietnamese stock market, particularly with regard to order modification/cancellation, trading time, order priority, and order display.

The expansion of time to trade for restricted stocks is the first new development. 15 periodic matching sessions are now held throughout the day, every 15 minutes, as opposed to only one session. For investors, this improves information accessibility and liquidity.

Second, the KRX technology permits price or volume changes without voiding the previous transaction by allowing direct order update on the price board. This is a big improvement when there is a lot of volatility.

Third, the ATO/ATC session's order priority system has been modified. In contrast to the previous system, early-placed floor price orders (sell) and ceiling price orders (buy) will take precedence over ATO/ATC orders. Therefore, if investors wish to effectively compete in buying and selling, they must modify their order placement practices.

Lastly, there has been a major revision to the order display system as well. It now only displays the top three bid-ask prices after subtracting the predicted matched volume. By doing this, the "masking the board" issue—fake orders that throw off market psychology—that frequently occurs during ATC sessions is intended to be resolved.

"This is a big move in the direction of equity and openness in the stock market. These reforms are beneficial, particularly for professional investors and the derivatives market, even though it will take some time for investors to adjust," Mr. Thinh said.

In general, the May stock market trend is yet unknown. On the one hand, following the Q1 earnings announcement, investors are left in the dark. Additionally, stock investors will become cautious due to changes in interest rates and exchange rates both domestically and globally.

Nonetheless, the KRX system's performance can act as a "litmus test" for investor confidence. Technical advancements, according to experts, help to establish a transparent and long-term basis for Vietnam's stock market, even though they might not cause price waves right once. Investors must prioritize choosing equities with solid fundamentals and obvious supports, be alert, and keep a close eye on developments in domestic and international policies. The "selectivity and patience" approach will be crucial for stock investment success in the information void.