Stock market liquidity will improve in the early stages of the new year.

The stock market closed 2023 with an increase of more than 12% for the VN-Index and liquidity also improved significantly in the last trading week of the year. Cash flow is still tending to focus mainly on small-cap stocks to seek short-term profits.

On the positive side, the sharp decline in interest rates in 2023 after a period of rapid increase at the end of 2022 is the most significant supporting factor for cash flow into the stock market.

Meanwhile, factors holding back the market include the weakening of the macro economy, sharp declines in corporate profits, China's economic opening not as expected, geopolitical conflicts in the Middle East, etc.

Summing up the whole year, the stock market still brought positive results. VN-Index in 2023 increased by 12.2%, closing at 1,129.93 points. Although the score increased, the stock market had a year of declining liquidity. The average trading volume on the HOSE floor reached 15.2 trillion VND, down nearly 20% compared to the previous year.

In the last trading week of the year, liquidity on HOSE reached more than VND 80,372.2 billion, up 25.1% compared to the previous week, in which trading volume increased by 16.4%, showing improved market sentiment, good short-term cash flow and positive return to large-cap stocks, VN30 when foreign investors net bought again after 20 consecutive strong net selling sessions.

Proprietary capital flows play a leading role in market fluctuations, focusing on net buying in the underlying market, and this state has lasted throughout the trading period in 2023. Accordingly, during the bull market period in the first quarter of 2023 and the third quarter of 2023, the market received widespread support from this cash flow.

Notably, the typical trading behavior of proprietary capital in 2023 is to continuously increase stock accumulation at the end of sharp market declines, in the context of the increasing purchasing power of this capital flow.

In 2023, foreign investors were the focus of the market in the final period of the year when they continuously sold strongly on the HOSE. In total, this group sold more than 24.3 trillion VND on the HOSE for the whole year. Of which, they sold nearly 10 trillion VND in December. Assessing the impact of foreign capital flows, experts from FPT Securities Company (FPTS) said that the trading behavior of foreign capital flows only affects short-term fluctuations of the market.

Accordingly, the net selling movement of this capital flow concentrated in the second half of 2023 may not affect the market cycle scenario in the medium and long term. The peak of net selling transactions of foreign capital flows is concentrated in December 2023. Notably, the level and scope of transactions in the selling direction of this capital flow are gradually decreasing.

The 1,130-point mark is considered a technical resistance level, and also a short-term peak in the past 2 months. Therefore, it is understandable that the market "shakes" at this level after a series of strong increases in the past time, to re-check the cash flow. Many analysts are optimistic that the VN-Index will easily "escape this level" at the beginning of the year.

Observing fluctuations and short-term psychological thresholds, FPTS assessed that VN-Index will surpass the short-term psychological threshold of 1,130 - 1,140 points in the first quarter of 2024, which will be a signal confirming the end of the tug-of-war period. FPTS concluded that the expected fluctuation scenario in 2024 of VN-Index is the Middle Bull Market of the 6th cycle. In which the main trend is price increase and the fluctuation target is towards the 1,400 point area.

The stock market may maintain its uptrend in the first trading week of 2024 with the VN-INDEX heading towards a strong resistance zone around 1,150 points, an analyst from VNDirect Securities Company added.

Source