Stock market outlook for the week of August 22-11: “Bottom fishing” will be quite risky for surf investors
Demand remains very cautious, so we expect the corrective trend to continue early next week. Therefore, “fishing for the bottom” can be very risky for investors when the short-term trend in the market is still bearish.
The market is experiencing a week-long correction, with pressure on exchange rates and interbank rates showing no signs of abating. In particular, the USD index (DXY) continued its upward momentum last week as expectations waned that the U.S. Federal Reserve (Fed) would cut interest rates at its December meeting.
The basis for these expectations comes from information about the US CPI index in September 2024, which is in line with market expectations but higher than in September 2024, and the Federal Reserve’s recent remarks by Chairman Powell. There’s no need to rush.
The VND/USD exchange rate rose sharply again, reaching its peak in April 2024.
Therefore, the main trend for the VN-Index last week remained downward with a 4/5 correction session. Liquidity showed signs of gradually increasing over the weekend as the market retreated to deeper points and selling pressure remained prevalent. Positively, the VN-Index is returning to the sub-channel of an upward price trend of about 1.200 (+/-10) points since the beginning of the year.
With the RSI indicator retreating into oversold territory, Agriseco Research believes that the VN-Index will continue its downward inertia in the first session of the week, but expects the medium-term uptrend to remain and the market to move lower. There will continue to be technical recovery in the future. Additionally, investors should also consider a scenario where the index begins to break above the support area to test demand in the context that factors that still have a less positive impact on investor sentiment still exist.
Mr. Dinh Quang Hinh, head of macro and market strategy at VNDIRECT Securities Joint Stock Company, assessed the increasing momentum of DXY and bond yields. Government The United States has put pressure on the VND/USD exchange rate, significantly reducing the central bank’s monetary policy space.
The fact that the central exchange rate continued to rise last week, the interbank exchange rate recovered to almost the mid-level, and the interbank interest rate rose again to exceed the 5% level had a negative effect. It can affect trends in banks, securities, and steel stocks that are sensitive to exchange rate and interest rate fluctuations, as well as investor sentiment.
As foreign investors’ net selling momentum is concentrated in blue-chip stocks, pressure on stock indices is increasing. There has been some increased selling pressure recently due to increased cost of capital impacting investment performance.
Looking at past statistics, we can see that the stock market is often under pressure to adjust due to unusual developments in interest rates and exchange rates. However, Agriseco Research believes that exchange rate pressures are only short-term and not too severe for the following reasons: (1) The trend of monetary easing by the Federal Reserve and many countries continues. (2) Vietnam’s foreign exchange reserves are still at a safe level. (3) good trade surplus, (4) FDI spending and stable remittances. Therefore, it is expected that exchange rate pressure will calm down in the near future, which will help ease investor sentiment.
Therefore, looking at the upcoming markets, Mr Hinh said investors should prioritize portfolio risk as there is no sufficiently strong supporting information and no signs of interbank rates and exchange rates cooling in a sustainable way. Management at this time.
For investors with high portfolio exposure or using margin leverage, it may be necessary to take advantage of technical recovery beats to reduce exposure. Investors with low exposure or a lot of short-term trading should limit ‘bottom fishing’ when the market has not yet identified a turning point.
From a technical perspective, Agriseco Research believes that the VN-Index plunged 2,71% last week and lost the important support level of 1.240 points (corresponding to the lowest area set in September 2024). Liquidity continued to increase during the corrective session, demand remained very cautious and there was room for the corrective trend to continue in early next week’s session. Therefore, it can be quite risky for investors to “hunt for the bottom” when the short-term trend in the market is still bearish.
Conversely, for investors who plan to hold stocks for a long period of time, a market discount at a reasonable price will be an appropriate opportunity for investors to increase their exposure, especially in a situation where many stock groups are gaining momentum in absorbing liquidity. Lowest valuation level within a 1-year or 3-year period (e.g. banking group)
In market conditions with many unpredictable risks, investors should avoid spending large amounts and divide them into exploratory parts to ensure account safety.
Conditions? Are there any specific policies or measures that you believe could help stabilize the market in the short term?
Guest 1: Mr. Dinh Quang Hinh, Head of Macro and Market Strategy at VNDIRECT Securities Joint Stock Company
Guest 2: Abram Leggett, Senior Market Analyst at Viking Investments
Introduction:
Can you please provide an insight into the current state of the stock market, especially in relation to the recent market correction? What are the primary factors that are contributing to this correction, and how long do you anticipate it to continue?
Guest 1: The current market correction is primarily due to the increasing momentum of DXY and bond yields, which have put significant pressure on the VND/USD exchange rate. This has reduced the central bank’s monetary policy space, leading to increased selling pressure in banks, securities, and steel stocks. Additionally, foreign investors have been net sellers, further affecting stock indices.
Guest 2: I agree with Mr. Hinh’s assessment. The recent correction can be attributed to a combination of factors, including the strengthening of the US dollar and rising bond yields, as well as concerns about inflation and potential Fed rate hikes. Historically, corrections like these can sometimes last several weeks or more, depending on the underlying economic conditions and market sentiment.
Q: How are investors responding to this market volatility? Are they shifting their strategies or maintaining a long-term perspective?
Guest 1: Investors are facing increased pressure due to the unusual development in interest rates and exchange rates. While there are no clear signs of interbank rates and exchange rates cooling down in a sustainable way, some investors may be taking advantage of technical recovery beats to reduce exposure. However, those with a longer-term perspective may consider increasing their holdings in stocks with reasonable valuations and strong fundamentals.
Guest 2: Investors with lower risk tolerance may be reducing their exposure temporarily, while others may be using this opportunity to increase their holdings in companies with strong fundamentals and growth potential. It’s important for investors to remember that volatility is a natural part of the market and that maintaining a diversified portfolio can help manage risks over the long term.
Q: What are your thoughts on the government’s response to these market
