Vietnam Insight

Highlights

Mixed performance. US stock index futures fell on Friday as cautious investor sentiment prevailed while assessing the outlook for artificial intelligence (AI) and related technologies. S&P 500 and Nasdaq 100 futures declined 0.2% and 0.5%, respectively. In regular trading on Thursday, the Dow Jones rose 1.08%, while the S&P 500 and Nasdaq Composite gained 0.33% and 0.08%, respectively. These gains came as selling pressure on chip stocks eased after Nvidia CEO Jensen Huang defended the financial position of AI computing service provider CoreWeave Inc. For the week, the technology-focused Nasdaq Composite is on track to fall more than 2%, while the S&P 500 is down nearly 1%. The Dow Jones is poised to record a weekly gain of about 1%. The Nikkei 225 fell 4.9% to close at 64,426 on Thursday. European stocks closed mixed on Thursday, mirroring similar developments in North America, as declines in artificial intelligence (AI) infrastructure stocks and major banks offset strong performance in other sectors, with the Euro STOXX 50 down 0.4% and the STOXX Europe 600 up 0.3% to 640 points. Crude oil traded above $97 per barrel on Friday and is on track to rise more than 6% for the week amid growing supply concerns in the Middle East.

Decline and divergence. The market fell mainly because of VHM. In contrast, the financial group continued to show strength. The overall index kept edging lower with divergence; there is no sign yet of the market consolidating again and rebounding. VHM has decisively broken below the 62 trading zone, which it had successfully tested twice since June, which suggests that, unless the other groups rise strongly enough, the index is very likely to keep falling toward 1,660. Support and resistance are at 1,660 - 1,800, respectively.

Trading strategy: Favor defensive, low-beta names with strong cash flow, high dividends and low borrowings given high interest rates. With thin liquidity the market can fall suddenly, so this is a better time to buy on weakness than to chase prices. Pay more attention to individual sectors and stocks than to the headline index in a sharply divergent market. Favor sectors with strong cash flow and expectations of outstanding Q3 earnings.