VN-Index Breaks 1,800 but Large Capital Flows Stay on Sidelines: MBS Flags 3 Headwinds

Overview

MBS Securities has issued a note stating that while the VN-Index has recovered above 1,800 points, large capital flows have not yet fully participated. The brokerage identifies three key headwinds: persistent foreign net selling, narrow market breadth, and low liquidity. It predicts a possible rotation from large caps like Vingroup (VIC, VHM) into mid and small caps.

Key Facts

• VN-Index is trading above 1,800 points, up over 100 points from the 1,740 level in late March, but still 3.4% below the level when the Iran conflict began.
• Foreign investors have been net sellers for four consecutive weeks, totaling VND 11,000 billion (approximately USD 440 million).
• Only one-third of stocks on the VN-Index are trading above their 200-day moving average, indicating narrow breadth.
• Average weekly liquidity during the four-week rally was VND 26,800 billion, lower than the VND 37,500 billion average during the prior three-week decline.
• VIC closed at VND 177 on April 15, up 6.95% on the day; VHM closed at VND 138, up 6.83%.
• MBS notes that capital concentration in Vingroup stocks is at its highest since late last year, with VIC and VHM near old peaks.
• The brokerage forecasts a possible rotation from Vingroup to other sectors such as retail, food, aviation, industrial real estate, and construction.

What Happened

In its latest report, MBS Securities observed that the VN-Index has staged a four-week recovery, surpassing the 1,800-point mark and approaching 1,850 points. However, the rally has been driven by a narrow set of stocks, primarily large caps in the Vingroup ecosystem (VIC, VHM), while the broader market has lagged. The brokerage points to three specific headwinds: foreign net selling pressure, narrow market breadth, and low liquidity.

MBS notes that foreign investors have been net sellers for four consecutive weeks, offloading a total of VND 11,000 billion. This selling pressure has kept large institutional capital on the sidelines. Additionally, only one-third of listed stocks are above their 200-day moving average, suggesting that many investors’ portfolios have underperformed the index. Liquidity during the rally averaged VND 26,800 billion per week, significantly below the VND 37,500 billion average during the prior decline.

Market Context

VIC and VHM, both listed on HOSE, have been the primary drivers of the VN-Index’s recent gains. On April 15, VIC surged 6.95% to VND 177, and VHM rose 6.83% to VND 138, with high trading volumes. However, MBS warns that the concentration of capital in these two stocks is at its highest since late last year, and both are trading near their old peaks. This creates a risk of a pullback or rotation. The broader market’s low liquidity and narrow breadth suggest that the rally is not broad-based, and a shift to mid and small caps could occur.

Strategic Significance

MBS’s analysis highlights a potential inflection point for Vietnamese equities. The persistent foreign selling and low liquidity indicate that the current rally may lack sustainability. If capital rotates out of Vingroup and into other sectors, it could broaden the market’s advance but also introduce short-term volatility. For long-term investors, the key question is whether the VN-Index can break above resistance with broader participation, or if a correction is needed to reset positioning. The brokerage’s view that a rotation to mid and small caps is likely suggests that opportunities may emerge outside the large-cap space.

What to Watch

• Weekly foreign net flow data: A reversal of foreign selling would signal renewed confidence.
• VN-Index liquidity: A sustained increase above VND 30,000 billion per week would indicate broader participation.
• Price action of VIC and VHM: A pullback from current levels could trigger the expected rotation.
• Sector rotation: Watch for relative strength in retail, food, aviation, and industrial real estate stocks.
• MBS’s next weekly report for updated positioning and forecasts.