Don't buy stocks at the bottom when exchange rates are still hovering at historical peaks.

The Vietnamese stock market experienced strong fluctuations last week with the VN-Index falling 2.3%, closing at 1,255.1 points. In the same direction, the HNX-Index and UPCOM-Index both fell 1.2% and 1.0% to 239.7 and 90.7 points.

The real estate group was a rare bright spot in the market last week with DIG (+0.3%) and NVL (+6.1%) maintaining their growth momentum. The banking and securities groups had the least positive performance and made strong corrections.

Notably, net selling pressure from foreign investors continued to be a negative factor affecting the market. Last week, foreign investors net sold VND15,681 billion, marking the 7th consecutive week of net selling. In addition, the USD/VND exchange rate also surpassed its historical peak and headed towards VND25,000 despite the State Bank's efforts to absorb net capital through the OMO channel, which also made investor sentiment negative.

In fact, not only in Vietnam, the strength of the US dollar has also put selling pressure on Asian currencies as investors are increasing their short positions on currencies in the emerging Asian market. This development occurred when the US dollar price strengthened amid market uncertainty about the timing of the US Federal Reserve (FED) interest rate cut.

Speaking to Lao Dong, Mr. Dinh Quang Hinh - Head of Macro and Market Strategy Department, Analysis Division of VNDIRECT Securities Company - said that since the beginning of the year, the interbank USD/VND exchange rate has increased by more than 2% in just 3 months. This is also a cause for concern as the State Bank has continuously withdrawn more than 170,000 billion VND since March 11 through the OMO channel, but has not yet been able to curb the increase in the exchange rate. This development has significantly affected the psychology of investors in the stock market and triggered a selling momentum last week.

"Currently, the VN-Index is in a short-term downward trend and may adjust to the support zone of 1,230 points (+/-10 points). However, investors should not rush to buy the bottom in the context of the exchange rate heat showing no signs of cooling down and market fluctuations at a high level. Investors need to patiently observe the market's demand in the support zone around 1,230 points as well as wait for the market to establish a short-term balance before making a new disbursement decision.

On the contrary, for investors with high leverage ratios, it is necessary to adhere to discipline and watch for recovery periods to reduce leverage ratios to control portfolio risks," Mr. Hinh assessed.

According to experts from Vietcap Securities Company, VN-Index will continue to decline to test support around 1,235 points in the coming sessions. This is the convergence point between the March bottom and the MA50 support line of the mid-term trend. Therefore, it is likely that low-price buying power will be promoted if VN-Index falls to this area, thereby creating a tug-of-war as well as the possibility of a technical recovery for the index.

Thus, with the loss of the near support level around 1,265 points, corresponding to MA20, the market situation is becoming somewhat less positive and the risk of establishing a mid-term peak needs to be taken into account. However, the important support zone around 1,250 points is expected to play a notable role as a support point for the index and Agriseco Research believes that a technical recovery will soon appear here.

Source