SGI Capital: Prime Interest Rate and Liquidity Window of the Year Closed; Short-Term Correction Risks Loom in Stock Market

SGI Capital pointed out a lot of pressure on cash flow in the stock market, buying demand was quickly met and the market has potential correction risks in the short term.

According to a newly published report, SGI Capital assessed that the global stock market in March 2024 moved in sync with the S&P 500 increasing 3.1%, Stoxx 50 increasing 4.22%, Kospi increasing 3.95%, Nikkei 225 increased 3.07%, Shanghai Composite increased 0.86% while VN-Index increased 2.5%. 

The US market in particular is facing pressure to take profits as it continuously increases to the expensive valuation area, cash flow has focused heavily on risky asset channels while the FED is continuously attracting money through quantitative tightening activities. . However, the strong foundation for the US stock market so far is still the expectation of good profit growth of businesses (especially large technology groups) and the positive balance between falling inflation and low unemployment. .

According to SGI Capital, in case US unemployment exceeds 4% but inflation has not cooled down, the US stock market will be under selling pressure and have a negative impact on emerging markets and Vietnam due to the close connection.

Meanwhile, the Chinese economy is assessed to be trying to maintain growth thanks to green transformation and automation while the decline of the real estate industry continues to persist. Production and exports maintained growth but retail consumption remained weak despite stimulus measures. A soft landing for China's economy will be an important condition for Vietnam's economy to recover and maintain stability.

The period of low interest rates and best liquidity of the year is probably over, the market has found its balance

As for the domestic market, SGI Capital believes that Vietnam's economy continues to recover on a large scale in consumption, production, import-export, tourism and investment thanks to the low comparative background effect. Businesses and consumers are largely more optimistic than last year, reflected in the growth business plans of the majority of listed businesses. However, the recovery speed is moderate with an average expected growth of 10-15% compared to 2023.

Yields on Vietnamese Government bonds are at a large difference compared to US bonds and many countries in the region. This may continue to stimulate short-term capital flows (including FDI trade surplus) to withdraw from Vietnam in search of countries with higher returns.

Besides exchange rate pressure, in case the State Bank sells USD to stabilize the exchange rate, SGI Capital believes that this may negatively affect liquidity and interest rates. Combined with the context that mobilization is slower than credit growth in the first three months of 2024 and banks' LDRs are still high, the interest rate level has bottomed out and could inch up again if credit growth accelerates.

"Overall, we are probably going through the period of low interest rates and best liquidity this year," said the SGI Capital report.

On the other hand, the real estate market is also warming up with more exciting transactions in large markets with real demand and limited supply. If it continues to spread, it will mark a phase transition and cash flow into the stock channel. Securities will be under competitive pressure from the real estate channel.

SGI Capital also pointed out many pressures on cash flow in the stock market such as the rapid increase in margin ratio in the past 3 months; Pressure from foreign investors to continuously sell net; Pressure from the issuance plans of many listed companies in the second quarter and net selling by internal shareholders also increased. 

Meanwhile, market liquidity has recently been attracted to a number of highly speculative and expensive stock groups with very large supply. Therefore, buying demand was quickly met and the market has potential correction risks in the short term.

After more than 5 months of increase, the report believes that a period of adjustment and accumulation is necessary for the market to find balance and reallocate cash flow more appropriately for the long-term positive trend and general recovery momentum of the market. economy.

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