Stock market in May: more challenges await

The Vietnam’s stock market started May with several negative signals, prompting investors to concern that the phenomenon ‘sell in May and go away’ will recur.
Stock market in May: more challenges await
After a long holiday, Vietnam’s stock market has seen sharp declines in the first trading sessions of May. Of which, in the trading session on May 6, the VN-Index lost nearly 17 points, or nearly 2 percent. In this trading session, statistics showed that on the Ho Chi Minh City Stock Exchange (HOSE) alone, market capitalization suffered a loss of nearly VND70 trillion (US$3 billion). In the next two trading sessions, although the benchmark just slightly slid, experts said that the market would be unlikely to recover as there is no group of stocks able to lead the market during this sensitive period.
According to Rong Viet Securities Company (VDSC), shareholders’ meetings have passed with several pessimistic signals. Most firms set their business plans lower than growth rate of 2017-2018. Low liquidity in recent months showed that investors seemed to neglect with the market at this moment. Tension on the trade war between the US and China remained the main risk of the market.
In short term, the market will face with more challenges than opportunities. First, negative information from negotiations between the US and China will possibly cause pressure on global stock market indices, especially S&P 500, Dow Jones and Nasdaq of the US stock market, which have climbed fairly high in the first four months of this year. At the same time, domestically, macro indicators are not as absolutely optimistic as the same period last year. This information will affect greatly to the country’s stock market. Therefore, the representative of VDSC said that the market will be unlikely to form rising tendency in May. However, it is possibly a nice time to buy shares during this sharp correction.
Yuanta Securities Company said that the factor that impacts negatively on Vietnam’s stock market is concern over downturn of global stock market instead of domestic macro factors. 
The most positive supporting information is related to the semi-annual review by Morgan and Stanley Capital International Inc. (MSCI) for market promotion expected to happen in late-May. MSCI will release the annual market classification report on May 13, which officially takes effect on May 29. Vietnam expected to increase proportion in the basket of MSCI Frontier Markets Index from frontier to emerging market.
According data updated by May 3 this year, in the MSCI Frontier Markets 100 Index, Kuwait held the largest proportion with 25.62 percent, followed by Vietnam with 17 percent and Argentina with 14.22 percent.
Report by CIBM Securities Company said that Kuwait would be possibly put in the watch-list for upgrading from June this year so the proportion of Vietnam in the basket of MSCI Frontier Markets Index and MSCI Frontier Markets 100 Index is expected to rise by 3 percent, from 17 percent to nearly 20 percent this time.
According to calculation by VDSC, if MSCI officially promotes Kuwait to MSCI emerging, the proportion of Vietnam in MSCI Frontier Markets Index will climb to 25.8 percent from 16 percent and that in the MSCI Frontier Markets 100 Index will surge to 30 percent from 17 percent. Accordingly, it is estimated that around US$60-70 million from funds observing MSCI frontier will flow into Vietnam. According to VDSC, although the new cash flow will not be able to help the benchmark to hit a new high, the information is still expected to back market sentiment.

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