Traders work on the floor of a securities firm. — Photo bnews.vn

HÀ NỘI — The Vietnamese stock market has failed to break the crucial 1,300-point threshold despite various efforts, preventing the establishment of a sustainable upward trend. 

The benchmark index's rallies have encountered significant resistance forces, compounded by a lack of supporting momentum due to divergences among industry groups. In particular, the securities stocks group seems unable to recapture the strong performance set at the start of the year.

Securities stocks displayed a positive trend in the first four months of 2024, buoyed by encouraging first quarter business results and capital increase activities.

However, since the end of April, the group has shown signs of losing steam compared to other sectors. Trading activity has been sluggish and many securities stocks have struggled to maintain their previous price gains.

Sustaining the recovery momentum is no easy feat for the securities industry, particularly given the waning market liquidity amid prevailing cautious sentiment.

Liquidity has exhibited a declining trend in recent months, with lower trading volumes and values. The billion-dollar trading sessions have largely disappeared, replaced by more modest matched order liquidity levels typically ranging between VNĐ12,000-15,000 billion (US$472.7-591 million).

Experts note that the gradual rise in interest rates has visibly impacted the market, particularly for securities firms with limited lending and margin activities amid the volatile market environment. 

The lack of momentum from margin operations may make it difficult to improve prevailing liquidity constraints in the short term, potentially affecting brokerage and margin lending revenues.

Meanwhile, the trend of global capital flow shifts is expected to persist. Strong net selling by foreign investors has weighed on domestic sentiment, with cumulative net selling on the Hồ Chí Minh Stock Exchange (HoSE) surpassing the 2021 full-year record of around VNĐ59 trillion. 

Though supported by domestic investors, the VN-Index has yet to breach the 1,300-point resistance point, which could significantly impact the profitable proprietary trading portfolios of securities firms.

The delay in the KRX project or the upgrading of the emerging market status remains an unresolved factor, which is not entirely positive. The relative steadiness of the securities stocks in recent months reflects the caution and wait-and-see approach of investors towards the market volatility.

Positive mid-and long-term outlook

KB Securities Vietnam (KBSV) noted that the current valuation of the securities stock group has reflected the positive outlook for the second half of 2024. Currently, the industry's stocks are trading at or near the std+1 (standard deviation) zone of the 5-year average price to book (P/B) ratio.

However, the information gap related to the progress of the KRX implementation may lead to short-term corrections and accumulation in the securities stock group.

The securities industry outlook remains positive in the long-term. KBSV maintains an optimistic view on prices and liquidity of the Vietnamese stock market in the second half of 2024. Market profit growth is expected around 10 per cent this year, with valuations at reasonable levels.

Interest rates, even after increases, may still drive investment demand in the stock market as bank deposit returns become less attractive. 

On the other hand, anticipated rate cuts by major central banks in the world could narrow the Vietnamese interest rate gap, potentially reversing the recent foreign net selling course.

The market upgrade remains a key long-term driver. While an upgrade in 2024 seems unlikely, given the time needed to change pre-funding requirements, KBSV expects Việt Nam will be upgraded by FTSE Russell's assessment in 2025 and officially included in the FTSE Emerging Markets Index by 2025-2026.

Securities companies are expected to continue aggressively raising capital in the remainder of 2024. According to KBSV's analysis, the observed group of securities firms is projected to increase their total charter capital by over VNĐ26 trillion - around a 23 per cent gain from the the first quarter of 2024. 

This will be achieved through share issuances to existing shareholders, private placements and employee stock ownership plans (ESOPs).

The influx of new capital is anticipated to drive various business activities at these securities companies. It will boost their lending capacity for margin trading, strengthen investment resources and enable investments in systems, technology and human capital. — VNS