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Market comment – July 23
Thursday’s upward move caught us a little by surprise to be honest. For much of the day both markets were trading slightly higher before a sudden surge in the third session.
Thursday move in the VN-Index was the opposite of Wednesday whereby we opened at the low and climbed higher during the day. Some comments by an SBV official scotching the rumor of a compulsory bond issuance coupled with a net injection of liquidity into the banking system Thursday through the open market operations (OMO) seemed to reassure investors.
Market breadth widened considerably Thursday as most blue chips had a strong day. Foreigners were net buyers again and some retail interest returned. However volumes remain quite low in HCMC although they did increase in Hanoi.
The upward move towards the very end of the market day in HCMC was due to a very sudden surge in bids at the close. In just over a minute the number of bids (top three prices only) jumped from 4 million to 14 million. This kind of shock movement at the very end of the trading day looks a little artificial to us.
Overall we are cautious of the moves over the last few days as we see them as short term and likely to be short lived. To be honest though we didn’t expect the market to see such strength at the moment given concerns over credit growth and the currency so this has caught us by surprise.
H1 earnings season is over and the SBV is acting to reduce liquidity in the banking system in order to put a cap on interest rates and enable the government to complete their ambitious bond issuance program. And this is simply not consistent with a rising stock market.
And however they chose to execute their plans the inevitable result is likely to be less liquidity in the banking system in the H2. Therefore trading rallies aside we still feel the market’s direction will be lower in the weeks ahead.
Fiachra Mac Cana,
head of research at the Ho Chi Minh City Securities Corp
thanhnien
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