Political conflicts and disputes in the Middle East and exchange rate volatility have led to a tumultuous trading week in the Vietnamese market, marking the most significant decline for the VN-Index since October 2022.

Over the course of four consecutive trading sessions, investors witnessed a decrease in the VN-Index by more than 100 points.

By the end of last week, the VN-Index closed at 1,174.85 points, reflecting a decline of 101.75 points (7.97 per cent). This sharp decrease wiped out the gains made in the first three months of the year.

The market experienced a surge in liquidity, surpassing the 20-session average, as selling pressure intensified and spread across various sectors. Throughout the week, the average liquidity on the HCM Stock Exchange (HOSE) reached 1,070 million shares, representing a 41.23 per cent increase compared to the previous week. In terms of trading value, it amounted to VNĐ26.11 trillion, marking a 36.9 per cent rise.

Analysts from Vietnam Kiến Thiết Securities Joint Stock Company (CSI) highlight the broad decline across all industry groups, with sectors such as securities, industrial parks and construction experiencing intense selling pressure. Meanwhile, defensive sectors like aviation, pharmaceuticals and telecommunications technology appear less affected.

According to Mirae Asset Vietnam Securities Joint Stock Company, negative macroeconomic factors, including the continuously rising USD/VND exchange rate, Middle East tensions and net selling by foreign investors, are contributing to the sharp decrease in the VN-Index. These macro factors are creating a risky environment for the index.

In the short term, the 8 per cent decline in the past week may stimulate bottom-fishing psychology among investors with ample cash positions, indicating a potential technical recovery for the VN-Index. Technical analysis suggests support levels at 1,176 points and 1,181 points, and if the index touches these levels, a recovery is expected.

Saigon-Hanoi Securities Joint Stock Company (SHS) noted the continuous net selling by foreign investors on HOSE, with large-cap stocks like VHM, FUEVFVND and CTG being heavily sold. The market's sharp decline has broken the previous support range and ended the previous upward trend, resulting in negative investor psychology.

SHS said that the VN-Index has returned to the wider accumulation channel of 1,150 - 1,250 points, losing the momentum to form an uptrend. This suggests the possibility of a swing trend over a longer period, indicating a short-term trading style. However, SHS emphasises that this is still an accumulation movement in the medium term and does not indicate a new downtrend cycle.

Experts from SHS acknowledge signs of improvement in the domestic macro situation, with GDP growth in the first quarter of 2024 reaching a five-year high of 5.66 per cent. However, weak credit growth and high exchange rates continue to pose challenges for the real estate market, and the bond market has yet to see fundamental changes.

Given the unpredictable global economic situation, with low growth and economies entering recession in the EU region, the market is facing adjustment pressure. SHS warns that the VN-Index continues to decline, increasing the risk of deeper thresholds. Short-term investors are advised to reduce their portfolio proportion to a safe level during market recovery periods.