Stock Market: Where to Find Opportunities?

VN-Index dropped on the first trading date of 2016. The gap to the sentimental benchmark of 600 points, topping in July 2015, is getting wider in the current context. In the past seven months, the stock market of Vietnam has struggled to not slide too far to spirit up the eroding investor confidence.

 

Earlier, when VN-Index exceeded the 600-point threshold after a long period of standing in the range of 500 points and sometimes close to 400 points, many investors anticipated a very bright outlook for the market. Nevertheless, VN-Index only managed to stay above 600 points for a several days before falling down sharply.

 

In the first two months of 2016, losing days outnumbered rising days. On January 5 - the first trading day of 2016, VN-Index shed 4.47 points to close at 569.94 points while HNX-Index tumbled 1.02 points to settle at 78.43 points. The downtrend continued and VN-Index slid to 520 points and HNX-Index tumbled to 73 points.

 

China had to close its stock market because of excessive plunges and that move negatively impacted global markets, including Vietnam where investors are sensitive to world economic situations.

 

According to statistics from the State Securities Commission, in the first three weeks of 2016, the stock market closed higher only three sessions and ended loser 11 sessions. SSC President Vu Bang said investors are too sensitive and they are overreacting to external information and ungrounded rumours. 

 

Mr Phan Dung Khanh, Investment Advisory Director at Maybank Kim Eng Securities Company, said negative impacts from global stock markets will still linger. Statistics in the first three weeks of 2016 showed that the market outlook was very bad, with VN-Index losing 9.8 per cent to 522.24 points - the worst yearly start since 2010.

 

He added that the US Fed's interest hike is just in the beginning and it may raise interest rates more in the coming time, thus weighing on foreign inflows. Besides, the inclusion of China's yuan (CNY) to the currency basket of the International Monetary Fund (IMF) together with USD, EUR, JPY and GBP will surely affect Vietnam's exchange rate in the coming time. I think that CNY will further drop in the future and it will affect Vietnam's stock market. Then, it will be harder for Vietnam to draw foreign capital flows.

 

Notably, in 2016, market-leading industries like oil-gas and banking are unlikely to make a strong rally since their waves of gains have ended. Meanwhile, crude oil prices are on the fall and interest rates may be raised. Perhaps, penny and midcap stocks will advance but they are not strong enough to make VN-Index jump.

 

Although market operators and specialists have reassured investors, the best way to restore the investor confidence is to lead the market to go up but this depends on objective factors from the domestic economy. CNY "storm" has not passed, crude oil "wave" has shown no sign of ending, and major economies like the US are more volatile amid mixed data. These are shaping groundswells inside Vietnam's stock market.

 

In late February, VN-Index still hovered around 560 points, a drop of 30 points from the last day of 2015. This is a big value given current market liquidity and performance.

The market movement depends so much on investor emotion and confidence. Supporting policy information seems to lose effects while negative information immediately causes implications. Thus, according experts, investors should keep calm and cautious before mixed information on the market. If they act soundly, they may earn big returns in the volatile market.