Vietnam's benchmark VN-Index approaches 1,700-point territory

VN-Index, which represents the Ho Chi Minh Stock Exchange (HoSE), rose by nearly 15 points to 1,696 on Thursday, with steel stocks being a focus of attention.

The HoSE continued to trade in a tug-of-war state. VN-Index at times dropped by more than 5 points but ended the session up 14.99 points to reach 1,696.29 - approaching the 1,700-point zone.

Large-cap stocks were the driving force behind the index's strong increase. Twenty two out of 30 stocks in the VN30 group gained. The most prominent was leading steel stock HPG of Hoa Phat Group, up 6.04% to VND29,850 ($1.13) a share.

This is the general trend of the steel group after positive information about China's restrictions on domestic production is pushing steel prices to recover. NKG and HSG had the second consecutive session of ceiling price hikes. GDA, TVN, and SMC increased by 3% to 5%.

Although the banking group is diversified, the number of gaining stocks overwhelmed the declining stocks, notably MSB, VAB, VCB, BAB, and NAB. Similar developments also occurred in the real estate or securities groups.

Liquidity on the HoSE improved slightly compared to the Wednesday session with VND39,593 billion ($1.5 billion) in transaction value. However, this was still a low level compared to the average in August.

Talking with The Investor, Nguyen Thanh Lam, director of personal clients research and analysis at Maybank Investment Bank, assessed that in the short term, because the market is mainly in an accumulation phase, the contraction of liquidity (and also taking into account the factors before and after the National Day holiday - September 1-2) is a suitable development which is yet to cause much concern.

However, if liquidity continues to shrink, especially when the VN-Index breaks through the 1,700-point zone, it will be a signal that needs to be carefully monitored.

Foreign investors continued to net sell on all the three bourses (HoSE, HNX and the unlisted public companies market UPCom) to the tune of VND862 billion ($32.66 million), the lowest net selling level in the last five sessions.

This group net sold VPB, VHM, MSN, MWG, and GEX. On the contrary, they net bought HPG, MSB, FPT, NKG, and HSG. Thus, after a series of days of relentless net selling, foreign investors net bought HPG shares again.

According to experts, the recent net selling pressure from foreign investors may come from the story of exchange rates and pure profit-taking activities after the market had a significant increase in August.

In September, the world is expecting the next interest rate cut by the Fed. The Fed's interest rate cut will also give Vietnam more room to balance the exchange rate.

In addition, the Vietnamese stock market is expected to have its status upgraded by FTSE from "frontier" to "emerging" in October. As a result, domestic stocks are expected to receive foreign capital flows of up to billions of USD.

When the market status is upgraded, the disbursement progress will not take place immediately but may occur six months to one year after that according to the regulations of each fund, especially for passive index investment funds.