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Market correction likely to continue this week: analysts

Update: July, 20/2015 - 08:34

On the HCM City Stock Exchange, downward corrections appeared after the benchmark VN-Index hit its five-year peak of 640 points in Tuesday's trading, narrowing the weekly gain to just 0.22 per cent to close Friday at 628.63 points. — Photo bizlive

HA NOI (VNS) — Both stock markets registered corrections last week after seeing substantial gains in their earlier rallies. Analysts predict this phase could continue into the early sessions of this week.

On the HCM City Stock Exchange, downward corrections appeared after the benchmark VN-Index hit its five-year peak of 640 points in Tuesday's trading, narrowing the weekly gain to just 0.22 per cent to close Friday at 628.63 points.

Further, leading stocks, such as banks and insurers, lost steam in mid-week trading that resulted in the Index failing to rise above the 640 benchmark. In addition, profit-taking selling increased in other blue chips, which also contributed to the market's downtrend.

Yet the green came back to the market on Friday, along with recovery of blue chips, such as Bao Viet Holdings (BVH), Vietinbank (CTG) and Masan Group (MSN), but their slowed growth failed to lift the entire market. The VN30, which tracks the top 30 shares by market value and liquidity on the exchange, increased just 0.36 per cent in the week to record more than 651 points.

Meanwhile, with three out of five declining sessions, the HNX-Index on the Ha Noi Stock Exchange gave up 1.33 per cent over the week, ending Friday at 87.07 points.

Net selling by the foreign sectors in the last two sessions also raised cautions among investors.

Meanwhile, foreigners continued to conclude the week as net buyers, responsible for a net buy value of nearly VND62 billion (US$2.8 million). However, their purchases focused on Ha Noi's market, with an increase of nearly VND83 billion ($3.8 million) worth of shares. Additionally, they were net sellers with a value of nearly VND21 billion ($963,300) in HCM City.

According to analysts at Investment Vietnam Securities Co, it was expected to see corrections after the VN-Index soared from 600 points to the five-year peak of 640 points in a short time.

"It is possible to have other declining sessions this week that would push share prices down to more reasonable levels," they wrote in a note.

Liquidity also dropped substantially in the two markets last week.

The daily trading volume in HCM City's market dropped 21 per cent from the previous week, averaging over 153 million shares and worth almost VND2.5 trillion ($114.7 million) per session.

A similar figure on the Ha Noi exchange was 58.5 million shares worth VND721.3 billion ($33.1 million) per day, down over 7 per cent in volume compared with the previous week.

"Decline in liquidity could stem from the waiting attitude of investors to anticipate the upcoming release of business results in the second quarter. Investors seem to expect optimistic news from the construction and real estate sectors, with speculation about their positive sales," analysts of the financial website said.

According to analysts from Bao Viet Securities Co, in the short term, information about second-quarter and first-half earning reports, as well as prospects for businesses in the last six months, will support the market.

However, analysts predict mid-cap shares, such as securities, real estate and exporting companies, will have better opportunities in the near future, as those shares have yet to rise as strongly as blue chips. — VNS

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