Vietnam stocks rebound, yet bull trap risk remains

Vietnam's benchmark VN-Index gained nearly 12 points on Tuesday as bargain hunters returned after a sharp sell-off, but analysts warned that the rebound remained fragile and could turn into a bull trap.

Bottom-fishing demand improves

Tien Phong Securities (TPS) said stronger bargain-hunting after a wave of forced liquidations helped the VN-Index stay in positive territory for most of Tuesday session.

The index continued to consolidate around the 1,660-point support level, but there was not yet enough evidence to confirm the start of a new uptrend.

TPS expects the VN-Index to continue consolidating around the 1,660-point level to establish a firmer price base. If demand continues to improve, the likelihood of a technical rebound will increase.

Conversely, the 1,580-1,600-point range will remain a key support zone if selling pressure returns.

Saigon-Hanoi Securities also noted stronger demand and a sharp easing in selling pressure following the recent sell-off and margin liquidations.

The brokerage said the VN-Index was attempting to stabilize and could form a short-term bottom before moving into a recovery phase.

The near-term outlook would improve if the index breaks above 1,700 points, SHS said.

After the steep decline, the market could see a rotational recovery across different groups of stocks as demand at lower price levels continues to strengthen.

Recovery momentum remains weak

Despite signs of stronger demand, securities firms remained cautious. The VN-Index had rebounded off the 1,650-point mark, but market momentum remained weak, BIDV Securities (BSC) said.

Investors should remain wary of a bull trap, which is a brief rally that falsely signals a market recovery before prices resume their decline.

ASEAN Securities (ASEANSC) said the recovery attempt during Tuesday session was not strong enough to reverse the short-term downtrend.

The VN-Index still closed below its 10-day and 20-day moving averages, while momentum indicators such as the Relative Strength Index and Money Flow Index continued to weaken.

Bottom-fishing demand in oversold territory helped the index close near its session high, but downward pressure remained.

The market could trade within a narrow range before establishing a clearer direction.

Risk management takes priority

Securities firms broadly advised investors to prioritize risk management and refrain from increasing their exposure while the market continues to test the balance between supply and demand.

ASEAN Securities recommended that short-term investors maintain moderate exposure, avoid chasing prices during rebounds and trade around the 1,680-1,690-point support zone and the 1,700-1,710-point resistance range.

Viet Dragon Securities said investors should continue to put risk management first and use technical rebounds to rebalance their portfolios. It recommended reducing exposure to stocks that have broken below key support levels or shown signs of weakening.

Fresh buying should be limited to small positions in stocks that have fallen sharply or have company-specific catalysts, it added.

Taking a more positive view, Yuanta Securities Vietnam said market sentiment had stabilized as the heavy selling seen previously had subsided.

The brokerage expects the VN-Index to extend its recovery toward 1,710 points and potentially 1,730 points. It said the sharp correction had also created short-term trading opportunities in a broad range of stocks.