Although the market rebounded sharply late last week, securities brokers are afraid that the rally might be short-lived as the market is still vulnerable to negative macro-economic data and has yet to find foundation for a sustainable recovery.
The VN Index ended June in the green, adding 4.21 points, or 1.01 percent, to close at 422.37. Real estate stocks performed well with several tickers going limit-up while mining stocks like KSA, KSS, KTB and BMC also hit the ceiling after the start.
In contrast, the HNX-Index last Friday failed to hold unto early gains, losing 0.29 point, or 0.41 percent to settle at 71.07 despite positive market breadth. Liquidity on the Hanoi Exchange ran dry with only 27 million shares worth VND275 billion changing hands. Notably, put-through transactions contributed VND59 billion to the total volume compared to matching turnover of only VND216 billion.
Viet Capital Securities Co. after last Friday’s session said it is too early to say that the market is recovering after several days trading in the red. “We do note that the session was also the last for the second quarter and some NAV (net asset value) window-dressing might have played a role,” it commented.
HCM City Securities Corp. (HSC), meanwhile, said last Friday’s recovery on the southern bourse seemed to be a continuation of Thursday’s late rally in the HNX-Index.
“So while there was little follow-up buying on the northern bourse, we did see some late buying in some selected blue-chips listed in the southern exchange,” the broker said.
The VN-index continued to move higher to 422.37 points after rebounding off the support area of 418-412 points. The trade volume, however, failed to follow the suit as it trended lower to 28.9 million shares. This divergence signals a weak demand and should put the swing trader on alert for a trend reversal, HSC predicted.
The market ended June with a modest rebound of the VN Index, but this was not representative of the mood over the period. For the month, the VN-index fell by 1.5 percent while the HNX-index dropped by 4.4 percent.
HSC also noticed that July is traditionally the weakest month of the year with the average loss of 4.4 percent. Over the past 11 years of the stock market, the strategy of selling at the beginning of July and buying again at the end of the month has proved to be right in nine years and wrong only in two years.
“While the VN-index is less likely to break through 425 points, we suggest short-term investors to sell on strength for the time being, hold more cash and restructure their portfolio to minimise risks. A break down below the level of 418 points would push the market lower to the better support at 393 points,” HSC added.