|
Market comment – July 28
Both markets reversed direction Tuesday in a bout of profit taking after several days of strong movement. The turnaround was not unexpected as Monday already saw an increase in selling pressure. However with volumes remaining this strong the short-term bias is still slightly to the upside. Market breadth narrowed again while foreigners were net buyers again although less active Tuesday in percentage terms.
With only narrow gains on global markets overnight, the Vietnamese market had little to work with Tuesday at the opening. And having made a significant move already to the upside, the buying momentum has been slowing since Friday when the number of bids rose to 60 million or so briefly. Since then this number has declined steadily although it remained above the critical 15 million level until the end of the first session Tuesday. However, selling pressure held steady Tuesday and eventually both bids and offers fell below 10 million, which is a sure sign of profit taking.
Blue chips were very mixed and most saw fairly significant moves either to the downside or the upside, a sign of distribution and a change of gears for the market. And although market leaders such as SSI, ITA and REE ran to the ceiling Tuesday, they had little company. What happens from now depends on whether or not the bids pick up again today. If we see more buying energy returning quickly, the market will move higher in the short term. But sentiment has become rather fragile again and investors will need a good day today to convince them to stay in.
We keep our cautious medium-term view on equities as a variety of macroeconomic issues from the rapidly rising trade deficit to
heightened inflationary risks commanding the government’s attention at the moment. The central bank has moved very early
to change certain elements of monetary policy to prevent any return to the issues that plagued us in FY2008. This policy is being applied gradually and as gently as possible but the implications are clear.
And the price the authorities seem to be willing to pay is to slightly slow the pace of the nascent economic recovery in order to ensure macroeconomic stability going forward. Once normalization of monetary policy has been achieved, the pace of growth can speed up again. But that may take a quarter or two to work through.
Fiachra Mac Cana
Managing Director of Ho Chi Minh City Securities Corporation (HSC)
thanhnien
|
