Employees on the trading floor of Tân Việt Securities Company in Hà Nôi. Photo the courtesy of the company

HÀ NỘI Vietnamese shares are forecast to follow a downward trend in the short-term period as poor sentiment weighs down the market.

On the Hồ Chí Minh Stock Exchange (HOSE), the VN-Index tumbled to a 20-month low, falling sharply by 3.59 per cent to end Friday at 1,035.91 points. The index had lost a total of 8.5 per cent last week.

According to the news site cafef.vn, VN-Index of Việt Nam was the worst performing index in Asia on Friday, besides other decliners such as Hong Kong down 1.37 per cent, Thailand down 0.84 per cent and Singapore 0.11 per cent.

“As the support level around 1,075 points of VN-Index could not pause the decline, the market plunged and kept its journey to find a new bottommost near the area of 1,000 points. With a deep drop, the market saw a low-priced buying flow in the afternoon, 'withdrawal' movement accompanied by an increase in order-matching volume that exceeded the 20-day average,” said Việt Dragon Securities Co.

“However, the status of trading at high price area has not shown any signs of improvement, the market still has not confirmed a solid signal for a quality recovery span. Currently, the nearest support zone that can hold back this decline is 1,000 +/- 10 points of VN-Index. Investors still need to carefully observe market movements, keep their portfolio at a safe level and wait for the next supportive move in cash flow.

“The support area of 1,000 points will probably be the area to help restrain the decline of the VN-Index and VN30-Index. Therefore, investors still need to carefully observe market movements, keep the portfolio at a safe level and wait for the next supportive move of cash flow,” the company said.

The domestic market last week went against the recovery trend of world stocks as it continued to decrease for the 6th consecutive week. This is also the strongest weekly decline in the past five months. The VN-Index has dropped nearly 31 per cent since the beginning of the year, one of the biggest decliners in the world.

After nearly three years, VN-Index has returned to the price range of 1,000-1,030 points, the same value as the highest price peak in 2019, before the COVID-19 pandemic.

The current price trend and market sentiment resemble that during the strong decline week in March 2020. Therefore, it is expected that the market will gradually differentiate, and the selling pressure will occur in the next 1-2 weeks at the support area of ​​1,000-1,030 points.

In the short term, market sentiment will remain pessimistic. VN-Index will follow the falling path in the short and medium term so the market can regain balance.

"Investors should still maintain a reasonable proportion, wait for new information about the third quarter of 2022 earning season of enterprises, as well as the general market's trend to improve before considering increasing the investment portfolio," SHS said.

Due to the prevailing risk sentiment, VN-Index will be strongly supported at 1,000-1,060 points, corresponding to an estimated price-to-earnings (P/E) at the end of 2022 of 9.9x-10.5x. Therefore, the next correction phase will open the opportunity to accumulate good stocks, said Mirae Asset Securities Vietnam.

According to the State Securities Commission (SSC), in the last months of 2022, with the possibility that the Fed and many central banks around the world will continue to tighten monetary policy to bring inflation back to control, the stock market may face a number of challenges, typically a wave of interest rate hikes, inflationary pressures, rising corporate costs, geopolitical tensions. The above factors are likely to affect cash flow and liquidity in the stock market.

However, in the medium and long term, Việt Nam’s stock market still has potential for growth thanks to a number of positive factors such as positive growth of the macro-economy, prosperous production and business activities of enterprises.

Statistics show that, among enterprises that have published semi-annual financial statements in 2022, 864 out of 994 companies reported profits, accounting for 87 per cent, equal to the same period in 2021. Among the listed companies, 582 out of 647 companies reported profits, accounting for 90 per cent. VNS