The Ho Chí Minh Stock Exchange in HCM City. — Photo cafef.vn

The downtrend is expected to continue this month while investors are finding it harder to earn profits in the short term.

Việt Nam’s benchmark VN-Index on the Hồ Chí Minh Stock Exchange finished last week at 991.10 points, down total 0.22 per cent on a weekly basis.

That was the first losing week for the VN-Index after it had gained total 5.32 per cent in four straight weeks between June 27 and July 26.

Foreign investors net sold total VNĐ461 billion worth of shares on the southern market. An average of nearly 177 million shares was traded in each session, worth VNĐ4.43 trillion.

Last week, the market rally stopped because investors were stunned by negative developments in the US-China trade relations.

After the talks between the two sides’ top officials ended without any consensus, the market was hit by the idea of US President Donald Trump about a 10 per cent tax bill on US$300 billion worth of Chinese products imported to the US.

That idea, tweeted by Trump, is scheduled to take effect on September 1 and it clearly worsened the bad trade relations between the US and China amid worries about the slowdown of the global economy.

Meanwhile, the US Federal Reserve’s July meeting concluded with lending rates being cut by 25 basis points instead of 50 basis points.

The rate cut had been widely expected. However, what worries global investors is that the Fed’s statement on future rate cuts seems too soft and depends on the strength of the US economy.

According to Lê Đức Khánh, director of market strategy at PetroVietnam Securities JSC, the unpredictability of US policies has caused global economies and equities markets to become more volatile.

Those developments will have a deep impact on other central banks’ monetary policies and on commodities like oil and gold, thus global stock markets may fall in the coming week.

Since March, the Vietnamese stock market has reacted little to international news and the impact of internal factors, Hoàng Thạch Lân, director of individual investors department at Viet Dragon Securities Co, told tinnhanhchungkhoan.vn.

In August, the US and China will return to the ring amid the escalation of their trade war. A lot more tough decisions and negative news are expected and the market sentiment will be dampened, he said.

Besides international news, the internal power of the Vietnamese stock market is not as good as expected because corporate earnings are below expectations.

According to BIDV Securities Corp, 693 listed firms or 93 per cent of all listed companies have announced their Q2 results by the end of the week.

After the second quarter, those companies earned total VNĐ108 trillion ($4.64 billion) in six-month post-tax profit. The figure was up only 3.4 per cent year on year.

Fifty-one per cent of those firms recorded positive earnings growth rates while 12 per cent of them suffered losses in the first half of the year.

However, major earnings still came from large-cap stocks as two-thirds of the earnings were contributed by large-cap firms.

Banks also had the highest portion of the market’s total, accounting for 15.6 per cent of the market’s so-far total earnings.

That means small- and medium-sized companies were still left behind amid the difficulties of the economy.

According to Bảo Việt Securities Co (BVSC), business results are still the support of the market but they are not the most important factor as in previous years.

As of July 3, Việt Nam’s price-to-earnings per share ratio (P/E) and price-to-booking per share ratio (P/B) were 16.6 and 2.4, respectively, which is comparable to other regional markets.

Corporate earnings indicated “a slowdown in revenue and profits of businesses listed on the Hồ Chí Minh Stock Exchange (HoSE) and Hà Nội Stock Exchange (HNX),” BVSC said in its six-month macro-economy report.

“Earnings per share growth may not be maintained at a high level as in previous years. In the second half of 2019, business performance will no longer lead the market up as in 2017 and 2018 though it is still supporting the market.” — VNS