Although share prices have dropped a lot, the market liquidity has not improved. This has distressed most investors. But, according to many securities experts, this is an opportunity for investors with medium and long-term visions.
Huge pressures on investors
It has already been over four months since the effective date of Circular 36 and the Vietnamese stock market kept nosedived and broke the sentimental resistance of 550 points. The market dropped in the first quarter and no improvements have been witnessed in the second quarter. According to analysts, the market presently lacks driving stocks to lead the upturn.
The prolonged sideway has dispirited many investors although some still placed their trust in equity assets. So, what are they waiting for? According to Viet Dragon Securities Corporation (VDSC), these investors expected higher values in the next 3- 4 months. Indeed, the market performance may improve if macroeconomic and corporate data are better. Besides, this low-point market is also a chance for many investors to buy shares to lower average starting share prices in their portfolios.
Analysts recommended that investors should not expect for a short-term wave but look to a longer-term. Companies with good fundamentals are likely to have good business results in the following quarters. In nearly May, the market was volatile after China brought a new oil platform to the East Sea as they did last year.
However, the volatility lasted for a few days and the old lacklustre tone returned. Stronger foreign buying brightened the gloomy picture. The recent tests show that many investors are holding abundant cash on their portfolios but they expect prices to go lower. This is a reason why the market cannot rally immediately.
Which industries are hot picks?
According to many securities brokerage houses, the local exchange will continue to stage the sideways movement or even a slight decline, caused by poor liquidity. According to BIDV Securities Company, the market is in the state of tug of war, driven by positive factors such as net foreign buying and macroeconomic stability on the one hand and negative factors like political risk and high margin loans on the other although the possibility of foreign net selling is uncertain.
With boosting news, the VN-Index is projected to move in the range of 540 and 570 points in May while the HNX-Index will stay within 80- 84 points. Declining sessions will be good chances for medium and long-term investors to pick up stocks with good prices.
Remarking on medium and long-term market outlooks, VDSC said that the market will be affected by Decree 58 which includes the change in the ownership ratio of foreign investors in joint stock companies. In previous years, the uplifting of foreign ownership room was repeated a lot but it was not adopted. This issue has drawn interests again after the draft Decree 58 (amended) was passed by the Ministry of Justice at the beginning of April.
Higher ownership limits will help the stock market draw more cash flows and create good impacts on fully foreign-owned companies on the market. Besides, the Government is planning to equitise many State-owned enterprises (SOEs) and this move has exerted enormous pressures on capital sources for equitisation. Thus, the uplifting of foreign ownership limit is hoped to partially relieve those pressures.
Hence, the increase in foreign ownership limit is good not only for foreign investors but also for domestic investors and regulatory agencies. Recently, the State Bank of Vietnam (SBV) was tasked by the Government to study the increase of foreign ownership limit in commercial banks from current 30 percent. This information weighs up the possibility of foreign ownership limit increase in the near term. This is the most expected information in the second and third quarters of this year.
According to securities experts, investors should focus on blue-chips in garment-textile, real estate, fisheries, construction, building material, automotive retail and forwarding industries. Garment and textile industry is considered a hot pick in 2015 as up to 61.7 percent of companies surveyed expected in more orders.
Many businesses anticipated an increase in prices after the Vietnam - Korea Free Trade Agreement (VKFTA) was signed. Furthermore, positive changes are seen in much-awaited Trans-Pacific Partnership (TPP) Agreement. For that reason, the prospects of garment-textile industry will be very optimistic. So, this may be a key drive on the stock market in the upcoming time.
Luong Tuan
Vietnamese
