Identifying risks from global “headwinds”

The stock market ended July with many fluctuations, in which the VN-Index lost all the accumulated results in the first trading week with a series of consecutive declines lasting 3 weeks and closed at 1,251.51 points, a slight increase of 6.2 points compared to the previous month. In particular, the picture of business results in the second quarter, although very positive, could not improve the general trading sentiment.

According to the August strategy report of Mirae Asset Securities Vietnam (MASVN), after the first three trading sessions of August, the Vietnamese market received headwinds in the world market, causing a "red sea" phenomenon to spread to almost all major stock markets around the world. In particular, the VN-Index decreased by nearly 50 points (-3.92%) on August 5. MASVN believes that the trading performance in the first sessions of August is reflecting the risk aversion of investors, especially domestic individual investors.

The negative factors and risks that investors need to monitor in the coming time are pointed out by MASVN, including the weakening labor market in the US, which is likely to force the Fed to act faster with large-scale and continuous interest rate cuts.

In addition, the wave of investment in technology stocks gradually cooled down in the US when investors feared that the market would go through a similar phase to the Dotcom bubble in 2000. At that time, although artificial intelligence technology possessed a lot of potential, it came with a huge investment cost, but the ability to generate profits at present was still an unknown while technology companies were still accelerating the process of cutting costs through optimizing human resources.

At the same time, the asymmetry in monetary policy is likely to push the US into a stagflationary situation. The Fed has slowed the pace of its balance sheet reduction from $60 billion to $25 billion per month, while there is a possibility that the Fed will be forced to cut interest rates early and closely follow market developments as recession risks become more apparent. This leads to asymmetry in monetary policy.

Japan has emerged from a period of cheap money and negative interest rates, which has led to a surge in demand for the Japanese yen in recent times. This is also the reason why the USD/JPY exchange rate has fallen more than 12% in the last two months since its historical peak.

In addition, the risk of conflict in the Middle East along with the trade war between the US and China will prolong the recovery time of global trade. In the context that both countries are key trading partners of Vietnam but are also facing difficulties in promoting economic growth, MASVN believes that this is likely to have a direct impact on Vietnam's import and export activities in the future.

Expect positive movement of domestic macro factors

The risk of a decline is still present as the general downward pressure on major stock markets will also negatively impact trading in the Vietnamese market. According to analysts from MASVN, the expectation of this support zone is based on the assessment of Vietnam's macroeconomic improvement in the first 7 months of the year and the trend of corporate profits recovering in the first half of the year.

VN-Index faces profit-taking pressure as it approaches the 1,300-point zone - Source: MASVN

The stock market in July has cooled down due to the lack of new stories. The picture of business results in the second quarter, although growing well from a low base level in the same period, has not been able to improve the general trading sentiment. According to calculations by this securities company, the total profit after tax and minority interests of enterprises listed on HOSE reached more than 105 trillion VND in the second quarter, up 16.1% over the same period and 5.1% higher than the previous quarter.

Assessing some macro factors, MASVN believes that Vietnam's macro economy recorded many positive points such as Vietnam is still a destination attracting FDI capital flows, and exports expanded their growth momentum in July. The industrial production index (IIP) maintained its recovery momentum in July (+11.2%) and the first 7 months of the year (+8.5%). At the same time, the S&P Global Vietnam manufacturing PMI reached 54.7 points in July, showing that the health of the industry has improved for four consecutive months. In addition, new orders and new export orders increased, boosting purchasing activities and increasing employment. Therefore, MASVN expects industrial production to continue to improve in the coming time, thanks to continued improvement in exports and imports of input materials maintaining double-digit growth in the first 7 months of the year.

PMI index of Vietnam and some countries - Source: MASVN

At the same time, public investment will be promoted in the coming months. With the public investment plan assigned by the Prime Minister for 2024 of VND 669.26 trillion, in the first 7 months of the year, disbursement of public investment capital continued to be slow, down 8.4% over the same period and only completed 32.2% of the total capital plan and 34.7% of the plan assigned by the Prime Minister.

“We expect that public investment disbursement will be accelerated in the coming months, in line with the economic growth target and the roadmap for completing infrastructure by 2030 as a basis for attracting FDI in the long term. To achieve 95% to 100% of the Prime Minister's plan, an average of at least VND67.3-72.9 trillion per month will be needed in the remaining 6 months, equivalent to 2 to 2.2 times higher than the average disbursement level in the first 7 months of the year,” said an analyst from MASVN.

In addition, the pressure on the exchange rate that once "made things difficult" for the stock market has eased during this time. According to collected information, MASVN believes that the State Bank has sold about 6.6 billion USD since the beginning of the year to cool down the exchange rate. The analysis department of this securities company assessed that this is a relatively successful achievement when compared to Vietnam's current foreign exchange reserves and the trade surplus of up to 14 billion USD in the first 7 months of 2024 and especially when compared to the massive USD selling in 2022 and 2023.

Source: https://baodautu.vn/mirae-asset-viet-nam-se-co-luc-cau-lon-neu-vn-index-ve-vung-dinh-gia-hap-dan-1050---1150-diem-d221954.html