Has the stock market created a bottom?

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The market creates a bottom in the long term. Photo: Internet

The market shows recovery

After hitting the new record of 1,528.57 points on January 6, the stock market and VN-Index has revised down in the second quarter to 1,150 points in June.

Closing the market on June 30, the VN-Index reached 1,197.6 points, down 20.1%. However, the market showed a recovery.

As of August 19, VN-Index was at 1,269 points, up over 100 points compared with the lowest level in June.

According to Passion Investment’s CEO La Giang Trung, the two factors to know whether the market has made the bottom or not are stock valuation and investor sentiment. The price of the stock market is not very modestly priced, so it has not yet made the bottom. If the market creates a bottom, the investors will be very pessimistic and will not participate in transactions, even if the market recovers.

Meanwhile, the investors still actively perform transactions. When the market sees a recovery, the price of many stocks will surge again. If the market reaches the bottom, the price will fall. This shows that the recent decline in the market has not created a bottom.

According to Mr. Pham Luu Hung, Chief Economist of SSI Securities Joint Stock Company, it is very difficult to recognize signals of a market bottom. The Chief Economist also said that in each period, the market will make the bottom with different signs.

Short-term bottom

Mr. Do Ngoc Bao Deputy General Director of Vietnam Construction Securities Joint Stock Company (VNCSI) said “the market has made a bottom in the short term. The market fell sharply in the second quarter of 2022, creating a balanced ground around 1,150 points. Over the past month, the market has increased from 1,150 points to about 1,270 points on August 19.”

“Therefore, the short-term bottom of ​​VN-Index was at 1,150 points, it is not possible to confirm that this is the long-term bottom in certain manner.”

According to the VNCSI’s Deputy General Director, to meet conditions for the long term bottom there will need to be a correction to check the point area. Currently, it can only be confirmed that this is a short-term bottom.

Mr. Ngoc also said that the recovery of the market results from many factors such as the return of cash flow, when the business results of listed companies are quite positive, the expectation of investors in the slow increase of the Fed's interest rates in the near future, when inflation showed signs of hitting a record in July and the recession of the US economy for two consecutive quarters, and the Fed is also expected to gradually reduce interest rate in the near future.

Regarding the market outlook from now to the end of the year, VNCSI’s expert said that the market will record positive factors in the third quarter and the risk factor may increase. In the third quarter, there are some factors supporting the market such as shortening the payment cycle and operating the odd-lot trading system. These two factors will help improve liquidity. Besides, the State Bank may grant more credit to banks. It is forecast that economic growth in the third quarter may reach double digits on the low growth of the third quarter of 2021. These are the factors that will support the market in the third quarter.

Commenting on the prospects of the stock market in 2022, Agribank Securities Company (Agriseco) maintains its forecast of profit growth for the whole market in its investment strategy report in 2022 with an increase of about 25-30% compared to the same period of the previous year.

Businesses continue to keep the recovery momentum in profit compared with the 3rd and 4th quarters of 2021. The interest rate support package, the promotion of public investment and Vietnam's potential to attract FDI will help many businesses benefit and grasp opportunities.

According to Agriseco, after falling about 20% since the beginning of the year, the valuation of the stock market as well as many stock groups is becoming more attractive and suitable for both short-term transactions and long-term investment.