Will the stock market keep on moving sideways?

Faced with this circumstance, investors must exercise caution, minimize margin leverage, and restrict short-term trading.

Continued swings

The Vietnam stock market appears to be directionless, with the VN-Index staying around 1,280-1,300 points for several weeks. The 1,300-point mark is certainly a hurdle; selling pressure always rises sharply there, while purchasing desire progressively weakens, slowing the upward trend. To reach this level, the stock market requires extremely strong demand, a relentless purchasing force at any price, and the ability to generate cash flow. However, to do so, investors require reliable information, such as China's recent announcement of a large rescue.

According to recent observations, there has been a lot of favorable information, but it has not been able to attract fresh capital flow, such as data on 3Q24 macroeconomics, which showed GDP growth above 7.4%. Alternatively, the government intends to gradually cut interest rates in order to achieve GDP growth of more than 7%, which means that growth in 4Q24 must surpass 7.5 to 8%. It also implies that policies in 4Q24 will be more transparent, and capital flow will be encouraged to move more... Furthermore, the FED's 0.5% rate drop helps to stabilize and cool the VND/USD exchange rate, therefore boosting fiscal and monetary policy.

Cash flow climbed dramatically in numerous sessions, even briefly exceeding 1,300 points, before encountering difficulties again. The banking stocks attempted to break out but were unable to do so, so they could only strive to sustain their trend rather than create strength, as they had earlier this year. It is also worth noting that at the start of this year, the VN-Index was dominated by banking stocks. Most banking equities rise by 20-40% (VIB, TCB,...). That momentum propelled the VN-Index beyond the 1,200-point barrier and straight to 1,300 points, while cash flow spread strongly, driving up the prices of several firms like AVC, VGR, CTR, VGI, FOX...

In contrast, when a corporation receives adverse information, selling pressure rises dramatically. TCH shares, for example, were sold after they became involved with inspection information from earlier property deals. Alternatively, EIB shares were sold when information about the next litigation became available. Even though DIG shares received a relatively "small" regulatory punishment, the stock could not recover from its prior slump as a result of this announcement, falling by 7%.

Moving sideways is inevitable

During this time, the stock market is demonstrating a tendency in which positive news cannot rise; instead, stocks of firms facing unfavorable news will be under heavy profit-taking pressure. This tendency is diametrically opposed to 1H24, when bad news did not reduce and only good enough news improved stock prices.

With such a tendency, stock expert Nguyen Huu Binh believes it will be difficult to generate an upswing, and as stock prices gradually decrease, they drain investors' accounts, making them impatient. Just one piece of bad news is enough to launch a severe decline, and this spark might strike unexpectedly, as it did in Japan's carry trade last July. Meanwhile, the Middle East war remains heated, and a new narrative has emerged on the Korean peninsula.

While domestic cash flow remains cautious, international investors have returned to net selling rather than buying, as they did in early October. The exceptional economic development should have been the bright spot attracting cash flow; thus, Nguyen Huu Binh believes that foreign investors' net selling remains an unresolved topic.
"Another issue is that the VN-Index frequently rises at the start of the session and then steadily falls at the end of the trading day. This situation has happened in four consecutive sessions and is quite similar to the time in early July 2024. This is a substantial likelihood that the stock market would fall," stated Nguyen Huu Binh.

With the above signals, Nguyen Huu Binh predicted that the VN-Index will fall below 1,250 points unless cash flow returns to drive up the price of bank stocks rapidly, which is improbable. In reality, investor attitude is constant; they will continue to expect and hold equities, so selling pressure is not too high. However, the sideways down trend is unavoidable, and it will offer dangers to investors who own equities that have been exposed to adverse information.