Stocks recover with low liquidity

After 3 consecutive weeks of sharp declines in late September, the VN-Index started the first week of the fourth quarter of 2023 with many fluctuations and maintained its 4th consecutive week of decline. In the last trading session of the week, the VN-Index increased again, however, the trading volume was below the 20-day average, indicating that the cash flow is still quite weak. In addition, the index continued to move sideways with alternating green and red candles in recent sessions. This shows that investor sentiment is quite hesitant.

After the current adjustment phase of VN-Index to nearly 1,100, SGI Capital believes that the market will enter a differentiation phase because market valuation has returned to a reasonable zone; interest rates are still low, creating conditions for businesses to recover; some businesses have continuously improved their fundamentals, passed the difficult bottom, and continued to maintain growth in 2024.

In the coming weeks, the market will remain cautious as it is not yet clear how much the State Bank's liquidity withdrawal will increase short-term interest rates, how long it will last, and how it will impact long-term bond interest rates and deposit interest rates. SGI Capital assesses that the fourth quarter will be an environment that is neither too liquid nor too positive in terms of growth, but is suitable for differentiation in both corporate business operations and stock price movements.

A recent report by BSC Securities Company has given two scenarios for the stock market in October based on macro forecasts and important events.

The first scenario according to BSC is that sentiment stabilizes after a series of declines since mid-September combined with good demand when the index and stock groups return to more reasonable valuation levels.

Foreign investors reversed to a net buying status while macroeconomic factors of the economy continued to show positive signals as the disbursement of public investment capital continued to be positive, and production and business activities of many industry groups showed signs of improvement.

The market is expected to be divided when businesses start announcing their third quarter business results. The VN-Index needs to consolidate after the decline to return to the 1,150-1,170 point range.

Meanwhile, in the second scenario, BSC analyzed that if the "hawkish" views continue to be expressed by FED officials before the FOMC meeting taking place at the end of October, this means that the FED will likely raise the operating interest rate once more this year and maintain this interest rate level for a long period of time.

The negative VND - USD swap status continues to be maintained and the exchange rate pressure in the fourth quarter of 2023 will begin to become more intense. It is not excluded that the State Bank may continue to issue bills in the open market (OMO) and use more powerful tools to balance liquidity and stabilize macroeconomic variables of the economy.

Anxiety and sell-offs may arise if the market continues to correct, with the VN-Index expected to retreat to the 1,100 ± 20 point threshold. In a positive scenario, liquidity is forecast to fluctuate at VND20,000 - 22,000 billion/session in the scenario where the VN-Index accumulates and increases slightly towards the 1,150 - 1,160 point range.

Exchange rates may continue to be tense, along with the existing selling pressure from foreign investors, which will significantly affect the market. However, the macro context is still relatively favorable and businesses will gradually differentiate when their third quarter business results are announced in October.

With the current market developments, BSC recommends some industry groups with advantages in the final period of the year including: export group; public investment group; industrial park real estate group and commodity and industrial group.

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