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Vietnam stock index poised for ‘turnaround’: Technical analysis
Vietnam’s benchmark stock index (VN-INDEX), Asia’s worst performer this year, may fall another 6 percent before reaching a “strategic buy point,” according to Viet Capital Securities Co.
“We should pay close attention to the 330 level as we expect this to be a strong support, which could mark a strategic buy point and the low for 2012,” Raphael Wilhelm, the brokerage’s Ho Chi Minh City-based director of technical strategies, wrote in a report dated Dec. 28. The index has slumped 28 percent this year, closing at 350.51 yesterday.
The VN Index has plunged on concern tighter monetary policy to combat Asia’s fastest inflation (VNCPIYOY) will hurt economic growth and corporate earnings. Consumer prices climbed 18.13 percent from a year earlier in December. Gross domestic product grew 5.89 percent this year, compared with 6.78 percent in 2010, the General Statistics Office said yesterday.
“We believe that we are close to a medium-term turnaround, based on pure price analysis,” Wilhelm wrote. “As well as that, we feel there are are just too many pessimists out there.”
The 76.4 percent Fibonacci (VNINDEX) support measured from the 2009 high and 2009 low “is around 328,” he wrote, indicating the index may not drop beyond that level. Wilhelm upgraded his medium-term rating on the index (VNINDEX) for the first time since Nov. 11, raising the outlook to “neutral” from “down.”
Technical analysts look at price charts to forecast resistance levels, or ceilings restricting further price increases, and support levels, or floors limiting declines. Fibonacci analysis is based on the theory that securities rise or fall by specific percentages after reaching a high or low, and that those percentages provide support or resistance levels.
Viet Capital Securities advised Vietnam National Petroleum Corp., the nation’s biggest fuel supplier, on its privatization process before it held an initial public offering in July. It also advised PetroVietnam Gas Corp., a unit of Vietnam Oil & Gas Group, before its IPO in September last year.
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