Fear of escalating conflict drives defensive capital flows as liquidity hits a 12-month low

As the deadline approaches, the risk of the Middle East conflict escalating could intensify, and global financial markets are holding their breath in anticipation. Domestic investors today sharply reduced trading activity and chose to stay on the sidelines, causing liquidity on both exchanges to fall to a 12-month low. The VN-Index is not fully reflecting trading activity in stocks. Total value of matched orders on HoSE and HNX on Monday session reached only 15.597 trillion dong, excluding negotiated deals, down 22% from the previous session and at a 12-month low. Compared with the 20-session average, liquidity has fallen about 38%. This is an abrupt liquidity decline that does not reflect a lack of cash. The situation indicates investor concerns amid threats that could spark a higher-level conflict in just a few hours. There is no momentum prompting investors to take on risk at this time. Staying on the sidelines could even be a prudent choice as the risk of a sharp correction remains. The VN-Index closed today with a modest 0.54% drop, equivalent to a loss of 9.05 points. This small move is “sleep-inducing” because breadth is weak with 76 gainers and 238 decliners, of which 149 declined more than 1%. The ability of large-cap stocks to balance the index is causing the index to no longer reflect actual trading. VIC rose 0.43%, VCB rose 0.52%, BID rose 0.77%, HPG rose 0.75% as the large-cap gainers. The VN30 basket was also very balanced, the representative index down only 0.06% despite 9 gainers and 18 decliners. Many stocks in the VN30 basket also fell sharply, but capitalization was not large enough to push the index lower: DGC fell 6.19%, PLX 3.23%, VRE 2.83%, SHB 2.68%, GVR 1.87%, MWG 1.26%... The blue-chip group saw only TCB down 2.35%, VHM down 1.85%, and GAS down 1.51%. VN30 liquidity today also fell sharply by 27% versus the previous session and by as much as 43% versus the 20-session average. The breadth of this basket turned negative over time; at the open there were as many as 22 green stocks. The data also show price slippage across all stocks, with 19 stocks slipping more than 1% from their highs. VHM from its high at 9:40 am to close fell 3.07%, VRE 4.63%, SSI 2%, GAS 2.24%... This price movement, together with the weak liquidity, confirms buyers have withdrawn. Even with overall low liquidity today, many stocks faced real selling pressure, pushing liquidity for certain stocks higher: VIX down 2.16% with 595.9 billion traded; BSR down 4.74% with 253.9 billion; CII down 3.33% with 236.9 billion; TCH down 4.24% with 208.1 billion; DXG down 3.82% with 201.1 billion; PC1 down 3.56% with 165.6 billion... Among the 149 stocks with the deepest declines, 25 stocks had liquidity above 100 billion. The rallying group still included 76 stocks, but notable trading was fewer than ten: NVL up 1.75% with 340.5 billion; GEX up 3.12% with 247.5 billion; GEE up 1.9% with 192.4 billion; LPB up 6.96% with 182.3 billion; VJC up 1.37% with 163.5 billion; VNM up 1.5% with 156.9 billion; HAH up 2.2% with 31.1 billion; SIP up 2.53% with 15.2 billion. Foreign investors today traded cautiously, with a net on HoSE around 114.2 billion. No stock showed extraordinary selling; the largest sellers were TCB -95.2 billion, MBB -94 billion, HDB -95.6 billion, MWG -65.3 billion, FPT -60 billion. On the buying side, net buyers included VIC +62.1 billion, GEX +52.7 billion, VNM +48.5 billion, MSN +46.3 billion.