Market to grow slowly amid ETF reviews, more selling

June 01, 2020 - 06:41
The fund’s quarterly review had little impact on local stock market and the market ended slightly up as investors waited for its final results


Trading activity at Vietcombank head office in Hà Nội. — VNA/VNS Photo Trần Việt

HÀ NỘI — The Vietnamese stock market may move marginally up as investors look forward to foreign exchange-traded funds (ETFs) to complete their quarterly investment reviews.

The US-based iShares MSCI Frontier 100 ETF on Friday completed its quarterly review.

The fund’s quarterly review had little impact on the local stock market and the market ended slightly up as investors waited for its final results.

The benchmark VN-Index on the Hồ Chí Minh Stock Exchange rose 0.36 per cent on Friday to end at 864.47 points

After iShares MSCI Frontier 100 ETF, the London-based FTSE Vietnam ETF is expected to announce its new list of investees on June 6.

According to SSI Securities (SSI), the British ETF will not make any changes to its investment list this time. Instead, the fund will just re-calculate the proportion of local stocks in the portfolio.

Calculation had been expected to complete on May 29. Target stocks in FTSE Vietnam ETF’s list are large-cap firms.

In a recent report, SSI Securities’ research unit forecast FTSE Vietnam ETF will increase investment in three stocks – Vingroup (VIC), Vinhomes (VHM) and Vietcombank (VCB).

Vingroup and Vinhomes shares will account for 15 per cent of the total portfolio, up 0.5-1.11 percentage points while Vietcombank shares will take an 8.65 per cent stake in the list, up 2.22 percentage points.

The fund is forecast to cut its investment in the remaining 15 stocks such as dairy producer Vinamilk (VNM; down 1.69 percentage points), Vincom Retail (VRE; down 0.28 percentage points), and steel maker Hòa Phát (HPG; down 0.32 percentage points).

“Investors will become cautious in the week that ETFs carry out their investment review, so trading may focus on small-cap and medium large-cap stocks,” MB Securities Co (MBS) said in a note.

But the quarterly review by ETFs is not the only thing that matters. A possible downturn of local purchasing power may affect the market’s short-term uptrend, according to analysts.

Individual investors have played a big role in driving the market upwards from its three-year bottom on March 24 as stocks were sent down to very cheap, attractive price levels.

The benchmark VN-Index had gained significantly by nearly 31 per cent in two months from March 24 to May 21. That made the Vietnamese stock market one of the best-performing markets in the world in April and May.

But growth slowed down last week to 1.37 per cent with alternate ups and downs during the week. Analysts are expecting more bumpy sessions in the coming weeks.

Phan Dũng Khánh, investment director at Maybank Kim Eng Securities (MBKE), said purchasing power of domestic investors – most of them are individuals – was still strong enough to lift the market last week while institutional investors – most of whom are foreign – were only willing to sell.

The escape of institutional investors, considered “big money”, and limited resources of individual investors may drag on the local markets in coming weeks, he told

“Higher market valuation and a slow-recovery economy increase the risks on the local stock market,” he said. “The price-to-earnings (P/E) ratio of the Vietnamese market is rising fast, so it will naturally slow down the market growth in June.”

Agriseco’s investment and analysis director Nguyễn Anh Khoa said new investors, who opened accounts in late March to hunt for cheap stocks, were the major driving factor of the stock market in April and May.

“Most of their investments have gained 20 per cent. But they will just run away as quick as they come,” he said. “Lower second-quarter corporate earnings will also encourage investors to divest from local companies.”

“But disappointing earnings have been widely expected, so selling pressure would not be harsh on local stocks and the market can absorb such pressure,” Khoa said. — VNS