MARKET OVERVIEW
MARKET: Last week, the market increased from 510.48 to 517.42 points. The investor confidence index has increased from 50.21% to 62.7%; the 4 week average index increased from 33.65% to 41.53%. This indicates that general market expectation is positive, in light with the market undervaluation of 0.14%-0.24%. Stocks with surprising earnings, potential splits and capital offerings have been the market targets. The rally made by this group could not be justified by any means of valuation.
ECONOMICS: Last week saw a slight monetary tightening through open market operations (OMO). There was a net withdrawal of around VND4,296 billion compared to a significant net-injection of over VND13,502 billion in the week before. However, the term of new injection was extended to 28 days, predicting a good liquidity for banks in the next few weeks. The average overnight rate rose little from 6.83% to 6.90%.
The VND/USD rate in the black market continued to fall in the last week. On Friday, the bid and ask rates fell to VND19,090 and VND19,120 per USD, from VND19,200 and VND19,230 respectively at the beginning of the week. The gap between the VCB’s and unofficial rates are now narrowed to about VND 20-70 per USD, showing a stable condition for the exchange market.
A focal story of the market is comments on the credit growth and the interest rate level. We emphasize that the current problem is not because of that banks do not want but of that they do not dare to lend. Lending at extremely high interest rates always means the probability of credit default is very high and thus this does not encourage banks to offer loans. The general market demand and supply principle does not work in this kind of credit market. Hence, it’s necessary to lower the cost of lending gradually and banks then can reduce their lending rates. The banks may have committed to not lending at rates higher than 14-15% (indeed we think they wanted this more than anyone else), but apparently they need to consider the gap between the interest cost and revenue to make loans accordingly. Net injection through OMO is one of the means, but the volume has seemed to be not significantly large.
On global markets, U.S. stocks rose for a sixth week, giving the Standard & Poor’s 500 Index its longest winning streak since April 2009, as reports showed the fastest job growth in three years and higher-than-estimated retail sales. European stocks rose for a sixth straight week, the longest winning streak in a year, as a U.S. jobs report indicated the economy is strengthening and concern eased that Greece’s debt crisis will spread to other nations.
Asian stocks also rose for a second week, as U.S. economic reports raised confidence in the strength of global recovery, and as investors bet the Federal Reserve will leave the benchmark U.S. interest rate at a record low.
TECHNICAL: Our technical models show a market consolidation should continue. Based on our fundamental justification, we expect a healthy market rally from mid-April.
TRADING PLANS: Many clients have told us that they like trading in this market because they can make profit from picking stocks with surprising earnings, stock splits and capital offerings. This is definitely a strategy that we recommend. We also suggest holding and gradually accumulating more shares on the market dips.
Post by Quach Manh Hao
