Vietnam stock market waits for large cash injections

The Vietnamese stock market has welcomed a healthy return of cash following recent ceiling deposit interest rate cuts, but larger investments are still waiting for new monetary and fiscal policies to prove effective, according to brokers.

The market recorded positive movements in May when all the indexes gained. The benchmark VN-Index increased 2.48% to close the month at 1,075.17 points thanks to improved liquidity.

The average matching value on the Ho Chi Minh Stock Exchange (HoSE), represented by the VN-Index, hit VND10.63 trillion ($452.7 million) per session, up 8.8% from April. Notably, mid- and small-cap groups turned cash magnets as trading value expanded 13.6% and 11.2% month-on-month, respectively.

Individual investors dominated with net buying of VND7.6 trillion ($323.5 million), accounting for 86% of the transaction value in May.

However, according to Viet Dragon Securities Corporation (VDSC), foreign investors net sold $119 million worth of Vietnamese stocks, leaving Vietnam as one of the largest foreign capital withdrawal countries in Asia, along with Thailand ($967 million) and Malaysia ($159 million).

In early June, positive cash flows running into real estate, banking and securities codes helped the VN-Index record four gaining sessions in a row with high liquidity. On June 2 alone, trading value on the HoSE climbed to VND18.35 trillion ($781.3 million) - the highest level in the past six months.

Waiting for cash to flow

According to VDSC, cash flows have shown signs of returning to the market after ceiling interest rates for short-term deposits have fallen over the past three months. However, the money flowing into the large-cap group remained low over concerns that most listed companies had not fully recovered in the second quarter of 2023 based on leading macro indicators.

According to the broker, large cash flows are still waiting for monetary and fiscal policies to be introduced and proven effective.

VDSC expects the VN-Index to fluctuate between 1,060-1,120 points this month. The market is still favorable for T+ trading, but it's not a good time to go "all in". Therefore, June will offer investors an opportunity to restructure their portfolios, especially those who have inadvertantly become long-term investors.

Sharing the same view, BIDV Securities Company (BSC) believed that the market still needs more time to verify clearer signals about the macro-economy and business results of enterprises.

In an optimistic scenario, the VN-Index is expected to continue maintaining an uptrend from May to return to the 1,100-1,150 point territory. Market liquidity will continue to improve along with more positive movements from foreign investors after nearly two months of net selling.

In a more cautious scenario, the U.S. Federal Reserve (Fed) is forecast to maintain a tight monetary policy, the Chinese economy could decelerate, and risks in the real estate sector are making investors more pessimistic, while the VN-Index may return to the area of 1,050-1,060 points.

Similarly, according to Saigon Securities (SSI), when the stock market is simultaneously reflecting the prospect of strong interest rate cuts this year, along with weak profit outlooks among listed companies, the market's trend will be sideways-up from now until the year-end, and volatility in the stock market will remain.

Factors that may affect the stock market include interest rate movements, new government policies, and the implementation of current policies that will help the Vietnamese economy escape risks from the global economic recession and gradually recover. The positive point is that by the third quarter of this year, most industries are expected to reach their profit bottoms. SSI recommended investors accumulate stocks gradually, especially when the VN-Index stands at around 1,000 points.

For its part, VNDirect Securities advised investors to take advantage of correction sessions to increase their proportion of stocks, prioritizing those with growth potential or benefiting from policies and falling interest rates in the near future such as securities, banking, construction, and electrical infrastructure.