Vietnam stocks await MSCI review, earnings season for fresh momentum in June

Vietnam's stock market may find support later this month from a potential market status upgrade-related review by MSCI and the upcoming half-year earnings season, after entering June on a cautious note amid weakening liquidity and persistent foreign selling.

According to data from the Ho Chi Minh Stock Exchange (HoSE), the benchmark VN-Index rose 0.5% in May to close at 1,863.49 points, extending gains recorded in April. During the month, the index reached an all-time intraday high of 1,927.9 points.

Despite the monthly gain, market performance was volatile. Stocks rallied during the first week of May, pushing the VN-Index back above the 1,900-point threshold, although gains were largely concentrated in a handful of large-cap stocks linked to the Vingroup ecosystem.

After surpassing 1,900 points, the market entered a correction phase, with trading activity weakening significantly toward the end of the month. The decline came despite several supportive developments, including efforts to accelerate state capital restructuring, easing deposit-rate pressures, and selective relaxation of credit limits for the property sector.

Brokerage Vietcap attributed the market's weakness in the second half of May to subdued liquidity, increased profit-taking activity, continued net foreign selling, and information on investigations involving executives at several power-sector companies, including PC1, HND, TV1 and TV2.

Caution extends into June

The market has continued to soften in early June as liquidity remains subdued. The VN-Index declined in three of the first four trading sessions of the month, falling from 1,863.49 points to 1,831.55.

Average daily trading value on HoSE has remained below VND20 trillion ($759.23 million). Even during a rebound session on June 4, total transaction reached only VND15.92 trillion ($604.4 million).

Vietcap said investors are likely to remain cautious throughout June, closely monitoring liquidity trends, ongoing foreign outflows, and developments in the Middle East.

The brokerage also noted that Vietnam's trade deficit of nearly $14 billion in the first five months of the year could continue to weigh on investor sentiment and fuel concerns over exchange-rate stability.

On the positive side, MSCI's market classification reviews scheduled for June 18 and June 23 could provide support if Vietnam is added to the index provider's watch list for a future market status upgrade.

MBS Securities expects correction pressure on both stock prices and trading volumes to persist during the first half of June. The brokerage pointed to rising interest-rate trends across parts of Asia and expectations that Japan could raise rates this month to support the yen despite domestic political challenges.

Against that backdrop, the VN-Index may continue testing support around the 1,800-point level while liquidity remains weak, MBS said.

However, sentiment could improve in the second half of June as investors gain greater visibility on Vietnam's economic performance during the first six months of the year and listed companies begin releasing semi-annual financial results.

MBS expects capital flows to return to sectors that stand to benefit from government growth-support measures, particularly banks and companies linked to public investment projects.

Retail, food and beverage, and telecommunications stocks could also attract investor interest as consumer spending is expected to increase during the World Cup season, the brokerage added.