Local stocks to slide on softened "Sell in May" sentiment

May 04, 2020 - 07:38
After a robust month of April, local shares are expected to settle down in May with some short-term downtrends, but the falls would be soft.


Sabeco's brewery production line. The company's shares lost a total of 9.4 per cent last week. — Photo sabeco.com.vn

HÀ NỘI — After a robust April, local shares are expected to settle down in May with some short-term downtrends, but the falls would be soft.

The benchmark VN-Index on the Hồ Chí Minh Stock Exchange was up 0.25 per cent to end Wednesday at 769.11 points.

The VN-Index fell a total of nearly 1.0 per cent last week while trading took place only in the first three days of the week before closing on Thursday and Friday for the national holidays.

In April, the VN-Index rose as much as 20 per cent from its three-year low of 660 points.

The gain was attributed to strong purchasing power as investors were hungry for cheap assets and measures to control the coronavirus breakout proved effective in Việt Nam.

The VN-Index lost a total of 26 per cent in March after the 17th coronavirus infection case was reported in Việt Nam on March 6.

After the local market returned from Tết (Lunar’s New Year) holiday on January 30, the VN-Index lost a total of 33.5 per cent until March 31.

The sharp decline even put large-cap stocks at very attractive prices to investors.

As of Sunday, the total amount of infections in Việt Nam stands at 270. The country has reported no new cases in the community for the past 16 days.

Of the total count, 219 patients have recovered and no deaths are reported.

Companies are also expected to hold their annual shareholders’ meetings in May after the events were postponed in April due to the spread of COVID-19.

This would be a boost to market sentiment as companies would deliver their future plans for the year in the context that both local and global economies have been torn by the global pandemic.

Since the Vietnamese stock market came into operation in 2001, the VN-Index rose in May in eight years and declined in 11 years. In 2018 and 2019, the VN-Index was down in May.

A market decline may continue in May this year but it will be an opportunity for the market to settle after stocks’ growth was impressive in April, according to analysts.

Stimulus packages were coming as the disease was basically contained and advanced markets in the US and EU re-opened partially, Huỳnh Minh Tuấn, sales director at Mirae Asset Vietnam Securities Co, said.

Investors may be more excited and the “sell in May” spirit would have little impact on the market, but in general, the market would not increase strongly like it did in April, he said.

Stocks have shown signs of weakening and investors started fleeing from local assets. “Vin” companies – Vingroup (VIC), Vinhomes (VHM) and Vincom Retail (VRE) – were down between 1.2 per cent and 3.8 per cent last week.

Other large-cap sector leaders such as brewer Sabeco (SAB), dairy producer Vinamilk (VNM), Masan Group (MSN), steel producer Hoà Phát (HPG), insurer Bảo Việt (BVH), PetroVietnam Gas (GAS), Vietcombank (VCB) and Bank for Investment and Development of Vietnam (BID) also declined.

Average trading liquidity fell 15.5 per cent from the previous week to nearly 222 million shares being traded in each session. More pressure came from net foreign selling, which was VNĐ1.28 trillion (US$55.75 million) last week.

“The market is waiting for supportive news to keep up trending after the earnings season is over,” BIDV Securities Co (BSC) said in its weekly note.

More than 70 listed companies have reported their Q1 earnings, including the 30 largest firms by market value and trading liquidity in the VN30 basket. The earnings-season effect was fading, BSC said.

“News from both local and global economies will be the driving force. The VN-Index will likely swing between 750 points and 800 points in the coming week,” the company said.

“Bad news has been taken into account and there will be less pressure on local stocks in May,” Nguyễn Hồng Khanh, director of market analysis at Vietnam International Securities C o (VIS), told tinnhanhchungkhoan.vn.

“Investors are really excited as Việt Nam is among the countries being able to contain the virus breakout quickly, so they are betting on the chance the Vietnamese economy will recover fast,” he said. — VNS