Biggest risks to stock market are over: analyst

The biggest risks to the stock market have passed, and this is the right time to accumulate stocks for long-term goals, said Nguyen The Minh, chief analyst at Yuanta Vietnam Securities JSC.

What do you think about the current stock market?

The stock market recently recorded a positive upward trend, but there was a divergence among stock groups. I realized that cash flow mainly ran into small- and medium-cap groups. Even speculative real estate codes attracted money.

The market continued to go up in the first half of May, and is likely to face correction pressure in the second half. Liquidity may be improved, but not at a high level. Cash flow will remain in small- and medium-cap groups, not blue chips.

Is this a period of following cash flow to make buy and sell decisions?

This is a period of following cash flow. Market risks have decreased significantly compared to 2022. Inflation has started to cool down. The U.S. Federal Reserve (Fed) still raised interest rates, but slightly. It is likely to end the interest rate hike in the last six months of the year, and even pump money to stimulate the economy again. The biggest risks have passed, and this is the right time to accumulate stocks for long-term goals.

Global risks have eased, and domestically, it is highly likely that the State Bank of Vietnam will loosen monetary policy by reducing policy interest rates in the last six months of the year, even as soon as June.

In addition, support policies to increase liquidity of the real estate market are expected to remove difficulties for the property market in the near future. This market will not recover until early 2025. However, in the short term, bottlenecks in credit flow may be less than the current. Therefore, investor sentiment may be more positive in the remaining half of 2023 and the market trend will become more sustainable and clearer.

What do you predict foreign investor movements would be in the near future?

The second quarter of 2023 recorded a slight net selling of foreign investors as they were concerned about the real estate and bond markets, but in the last six months of the year, they are likely to turn net buyers due to expectations of a market uptrend. Usually with positive movements, exchange traded funds (ETFs) are easy to be net pumped. Active funds are also likely to return to net buying in the year's second half when the risks pass.

In general, the net buying of ETFs and active funds will have a positive impact on the stock market.

In the current period, which industries should investors focus on?

The last six months of 2023 is the beginning of the stock market's recovery cycle. Normally, highly speculative cash flows will focus on stocks that have fallen deeply before. Investors can pay attention to the real estate group with good cyclical support factors, investor sentiment, and support policies. Other groups include transportation, securities, construction and building materials.

In order to accumulate stocks effectively, in the last six months, investors should increase the proportion of shares again, accepting higher risks, but not use financial leverage when the pressure lingers.