Profit-taking pressure from the top
Last week, the Vietnamese stock market recorded strong fluctuations with many deep declines. Notably, on October 20, the VN-Index decreased by nearly 95 points - a record decrease since the beginning of the year. At the end of the trading session on October 24, the VN-Index continued to decline by 4 points, stopping at 1,683.18 points. Analysts believe that this is a reasonable correction after a long increase, and at the same time an opportunity to accumulate for the end of the year.
Mr. Le Duc Khanh - Director of Analysis, VPS Securities Company - said that after reaching the strong resistance zone of 1,7951,800 points, the increased profit-taking pressure is understandable. Meanwhile, cash flow tends to focus on some large stocks such as Vingroup, VJC or MWG, making investors hesitant to buy. According to Mr. Khanh, an adjustment session when investor sentiment fluctuates due to false rumors can also cause strong fluctuations in the market. A correction before entering the uptrend is understandable, he said.
Mr. Nguyen Minh Hoang - Director of Analysis, Nhat Viet Securities Company - said that the main reason for the recent adjustment was that the market had increased too much. VN-Index moved from 1,100 points to nearly 1,800 points, an increase of more than 600 points. With the current valuation around 16'16.5 times, the market is no longer cheap, although not too expensive. When the index is at a high level, profit-taking pressure is understandable. Many stocks, especially securities and real estate, have increased by several hundred per cent since the beginning of the year.
According to Nhat Viet's data, as of September, the average growth rate of the whole industry reached about 73%. When stock prices have increased so strongly, investors taking profits is a natural reaction.
In addition, the market also needs adjustments after a long period of increase, helping valuations become more reasonable and creating room for new cash flow. If calculated from the most recent peak to the bottom, the VN-Index has only decreased by about 9%, not too much adjustment. The decline of nearly 100 points has made investors worried, but if calculated as a percentage, this decrease is only equivalent to 56% because the index is already at a high of 1,800 points.
Mr. Hoang added that information about corporate bonds last week only played a role in activating profit-taking psychology, not the main reason. Most of the issues have been handled stably. Selling pressure mainly comes from profitable investors who want to preserve profits or restructure portfolios due to low efficiency, he said.
Preparing for a new cycle
According to Mr. Hoang, at this stage, the level of differentiation between stock groups is very high. Many stocks have decreased by 2025%, while the general index has decreased by about 10%. According to Mr. Hoang, the current adjustment is reasonable and may be close to the end. If this is just a correction in the medium-term uptrend, the market will likely soon stabilize and have a new recovery from November onwards.
Mr. Hoang also said that during the 5 strong adjustment sessions, the market decreased by about 13%, but this is the normal adjustment range of an uptrend. If compared with the 20162017 or 20202021 periods, each correction period is often around 1014%, so the recent fluctuations do not affect the medium-term trend of the market, he said. Many large-cap stocks (bluechips) have decreased by about 20%, creating an attractive price zone for long-term investors. Codes with a good foundation, not too strongly enhanced, such as HPG, often do not decrease deeply and will be a notable choice for the next increase cycle.
In our observations, this correction is necessary to prepare for a new uptrend. From November onwards, when the new cash flow returns, the market will have a clearer opportunity to recover, he said.
According to statistics from Nhat Viet, in the past 12 years (from 2013 to present), from October to December every year, there have been 4 years in which the market increased in November. This shows that November is often still the Differentiation period, while the market only really improved in December, when most financial institutions have closed their portfolios and individual investors began to buy to celebrate Tet.
In particular, the industries that receive the most cash flow during this period are construction materials, finance and consumer goods. These are considered areas that are likely to become a pillar leading the market in the coming period.
