Investors warned of likely correction (Illustrative image. Photo VNA)

Hanoi (VNS/VNA)
- Investors were very excited after the benchmark VN-Index hit an almost decade-high last week and forecasts predict it will head to 1,000 points this year. However, analysts have warned of a likely correction this week after a long rally before the market goes further.

The VN-Index recorded the largest weekly gain in the past eight years, picking up over 5 percent last week. It closed November 24 at 935.57 points, the peak since December 12, 2008.

The bull market has been steady with the VN-Index climbing nearly 41 percent this year, sending it among the best performing markets in the world.

On the Hanoi Stock Exchange, the HNX-Index gained over 2.3 percent for the week, ending November 24 at 110.83 points. The northern market index has also expanded over 38.3 percent since the beginning of this year.

Both traders and analysts were upbeat with the market development when the index increase was accompanied with better liquidity.

An average of 245.4 million shares worth a combined 5.4 trillion VND (roughly 237 million USD) were traded in the two markets, up 10.7 percent in trading volume and 6.5 percent in value compared to the previous week.

Cash flow still continued to run in the market, focusing on major large caps, including VinGroup (VIC), Vincom Retail (VRE), Masan Group (MSN), Petrolimex (PLX), PV Gas (GAS), Vinamilk (VNM), brewers Sabeco (SAB) and Habeco (BHN), along with big banks like Vietinbank (CTG) and BIDV (BID).

The biggest gainers were Habeco, up 16.6 percent; Sabeco, up 13.9 percent; Vietinbank, up 14 percent; Vincom Retail, up 13.2 percent; and Masan Group, up 10.6 percent.

Though money seemed to reduce in the large-cap sector, which slowed down market growth in the weekend session, cash tended to spread to small- and medium-cap stocks.

Many of this group, especially real estate shares, hit the daily limit rise on Friday’s trade, including Refrigeration Electrical Engineering Corp (REE) and Dat Xanh Real Estate Service & Construction Corp (DXG), Quoc Cuong Gia Lai JSC (QGC) and NBB Investment Co (NBB).

According to Tran Duc Anh, a stock analyst at Bao Viet Securities Company, increased profit-taking pressure in large-cap stocks triggered high risk of a short-term correction for these stocks. However, as cash inflows are also running into mid-cap and penny stocks, a divergence can still be seen this week.

In a note to its clients on November 24, Viet Dragon Securities Co noted as cash flow is strong, it seemed ready to support the market when a deep correction takes place.

“This is exactly what happened in the last two sessions. This phenomenon may continue, but investors need to remain cautious and avoid being carried away by the market excitement, which could lead to unreasonable action,” it said.

The local stock market is backed by strong cash flows from both domestic and foreign investors thanks to successful mega deals this month, such as the stock debut of Vincom Retail and heavy investment of Singapore’s Jardine Cycle&Carriage in Vinamilk through share purchase.

These deals have electrified investor sentiment and the fact that foreign investors were willing to pay a premium to current valuations is leading a ‘retreating” of the local market, Fiachra Mac Cana, managing director at HCM Securities JSC told Bloomberg.

The derivatives market showed the best expectation of investors, with the future contracts due June 2018 reaching 1,036 points, which is 100 points higher than the reference index VN30, and contracts due March 2018 at 991 points, 50 points higher than the VN30.

According to Nguyen Duy Hung, chairman of Saigon Securities Inc, when the market is in a high state of excitement, the greed will lead to higher risk.

The market will need a necessary correction to return to the balanced state and smart money will seek opportunities in good stocks instead of pouring into hot stocks with continuous rises.-VNA