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Market to struggle with profit-taking after three-week rally

Update: April, 20/2020 - 07:01

 

Products are prepared for transport at a Sabeco warehouse. The brewer's shares have surged 43 per cent in the last three weeks. — Photo cafebiz.vn

HÀ NỘI — Stronger profit-taking is expected in the coming days as the benchmark VN-Index is on track to touch 800 points again and that short-term peak will be an opportunity for investors to realise their profits.

Việt Nam’s benchmark VN-Index on the Hồ Chí Minh Stock Exchange gained a total of 4.18 per cent in all five trading days of last week to hit its one-month high of 789.60 points. The benchmark has soared a fifth since it bottomed at the three-year low of 659.21 points on March 24.

But during the five trading days, investors at some points hit the market rally with increased profit-taking as they wanted to lock in short-term profits.

The hit was obvious on Tuesday and Thursday of last week when the VN-Index gained only 0.21 per cent and 0.45 per cent, respectively, after local shares were brought down and the market was only buoyed in the last minutes.

Signs showing the global pandemic COVID-19 had peaked in the US and Europe and Việt Nam’s efforts to fight the disease clearly supported the market sentiment and encouraged individual investors to buy in local assets, Sai Gon-Hà Nội Securities (SHS) said in its weekly report.

“Technically, the VN-Index has beat the 780-point level and it is now heading to the new short-term peak of 800 points,” SHS said.

But a short-term downtrend is possible as investors are betting the market will struggle with the 800 point level, the Hà Nội-based brokerage said.

“Strong purchasing power of domestic individual investors in the past three weeks is quite impressive. The 800-810 point level will be a strong resistance for local shares and the correction may start at this level,” Vũ Minh Đức, director of market analysis and research at VietCapital Securities (VCSC), told tinnhanhchungkhoan.vn.

The market is recovering strongly on a large scale in such a short time, generating high returns for investors, so profit-taking will get stronger when the market runs out of momentum, he said.

Shares have gained 30-50 per cent in the past three weeks, Dương Hoàng Linh, director of market analysis at Sacombank Securities (SBS), adding: “It is understandable short-term investors may want to make their way out now.”

Leading companies in the large-cap basket VN30 have seen their shares soaring recently. Retailer Mobile World Investment (MWG) has risen 39 per cent, conglomerate Vingroup (VIC) has jumped 34.4 per cent, and brewer Sabeco (SAB) has surged 43 per cent.

Those are three of the 10 biggest listed companies by market capitalisation. Their movement will have a big impact on the local market this week.

Some large-cap stocks have already shown signs of losing or swung within a tight range such as consumer firm Masan (MSN), Vietcombank (VCB), Bank for Investment and Development of Vietnam (BID), dairy producer Vinamilk (VNM) and PetroVietnam Gas (GAS).

Foreign trading will definitely be a heavyweight on the Vietnamese shares. Foreign investors last week net-sold total VNĐ1.3 trillion worth of local shares, down 27 per cent from the previous week.

Total net foreign selling reached VNĐ10 trillion in the first three months and has totalled at VNĐ13.75 trillion so far this year.

SBS analyst Linh said  the global pandemic has rocked the global markets and forced investment funds to cut their portfolios to tighten risk management.

“It is quite concerning given the prolonged struggle with the COVID-19 as it is not easy for domestic investors to make up for purchases of foreign investors, with huge financial capacity, at the moment,” he said.

Disappointing corporate earnings in the first quarter will also make investors re-think of their investments.

As of Friday (April 16), 60 companies have released their earnings reports/estimates for the first quarter of the year, according to data firm FiinGroup. Total revenues fell 14.3 per cent on-year to VNĐ111.4 trillion in January-March and post-tax profits slumped 58.6 per cent on-year to VNĐ5.5 trillion.

According to Đào Tuấn Trung, director of market research at Vietinbank Securities Co, earnings is the most decisive factor on the stock market. First-quarter earnings reports will guide investors through the hard times and help both companies and investors re-value the businesses in the second half of 2020 and time to come. – VNS

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