Why Vietnam stocks plunged to 3-month low

The market cap-weighted index of listed companies on the country’s biggest bourse, the Ho Chi Minh Stock Exchange (HoSE), lost 3.92% Monday, the largest single-day drop since April 15, to close at 1,188 points.

Nguyen The Minh, analysis director of Yuanta Securities, told VnExpress that the negative developments across global financial markets, fears of an economic crisis and rising geopolitical tensions have hit market sentiments.

“The psychological effect caused investors to sell off en masse.”

Investors were not forced to sell but rather made the decision to offload, either to cut losses or to take profits, amid fears the market might worsen, he added.

Analysts at Vietcombank Securities said the deep decline in the index was caused by proactive withdrawal of capital amid low buying demand.

Negative developments in the U.S. and Asian stock markets might have influenced investors, they said.

Risks remain in the short term, analysts warned. Saigon – Hanoi Securities said in a note that since the VN-Index has plunged below the sentimental 1,200-point level, it might dive further amid investors’ pessimism to around 1,150 points, down 3.20% from now.

Doan Minh Tuan, head of research and investment at investment consultancy company FIDT, said that in the worst scenario the index might fall to 1,180 points before recovering to around 1,200 points.

Amid high market volatility and lack of new investment, selling pressure would be high and investors might be exposed to risks, he said.

“Investors should prioritize a defensive position by keeping a safe ratio between safe stocks and speculative stocks. Using leverage is not advised.”

Some analysts said the escalating Israel-Iran geopolitical tensions, the risk of a mild U.S. economic recession and the unexpected tightening of monetary policy by the Bank of Japan would continue to put pressure on the VN-Index.

But Minh expected a shallower correction than during Covid-19 or the second half of 2022.

“Psychological pressure has caused a widespread sell-off, but this also creates more attractive valuations for many stocks in the medium and long terms.”

The market is now attractive to many investors who still have cash, he said, pointing out that there are no fundamentally negative economic figures. “I do not think the VN-Index will close this year below 1,200 points.”

He said after some correction the market is likely to bounce back.