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Market comment – July 24
We realize now we have been way too bearish at least for the short term. And the market taught us a hard lesson Friday. Apologies for that.
You can’t argue with 38 million shares on the bid side at the open. More reassuring noises from the SBV in a meeting with bankers and the belief that they will add some short term liquidity until the end of this month coupled with a breakout in the US had a soothing effect on sentiment Friday. And buyers came out in force from the open.
Market breadth was as wide as possible and bid levels were even higher by the close suggesting we have more upside to go next week. Foreigners were net sellers but that is normal on the way up (just as they are usually net buyers on the way down). All blue chips rose to the ceiling amongst 208 stocks on both exchanges which closed at the ceiling, a sign of a market in a full sprint. Some investors may feel that Vietnam has lagged behind global markets recently and that this is a catch-up rally.
However for the medium term we haven’t changed our view. Even if the SBV has stepped away from draining the money markets until the month-end they have clearly set out their stall on credit growth in the H2 and we all know that the State Treasury needs to either raise a huge amount of money from the financial sector for their bond program over the next six months or they may have to postpone key parts of their fiscal stimulus program. None of these options are healthy for the stock market.
However in the short term the market has achieved that critical momentum level for a breakthrough and we will likely move higher for the first half of next week at least. But once we get into August we need to watch the SBV’s daily open market operations carefully and also watch monthly loan growth numbers. While it may take a month or two for these to slow down we are as convinced as ever that by the end of Q3 monthly credit growth will have slowed to a crawl.
Fiachra Mac Cana,
Head of Research at the Ho Chi Minh City Securities Co.
A narrower trade deficit will help ease concerns over the dong’s depreciation and reduce pressure for the currency to depreciate.
Lower inflation will give the government more room to pursue its stimulus measures to achieve its economic growth target this year.
Recently, the market has been concerned about possible measures to tighten credit growth by the central bank for the rest of the year to prevent inflation from returning. If inflation continues to stay low as it has been, then there is no need for the State Bank to implement that yet, and that will somehow relieve the market’s concern.
This good news will strengthen investors’ sentiment and support gains in the stock market.
However, I would highlight that this year-on-year inflation figure has a high base from last year, hence inflation should still be watched closely.
Nguyen Xuan Minh,
Chief Executive of Vietnam Asset Management Ltd.
thanhnien, Bloomberg
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