VN-Index dips below 1,700 as downtrend persists; experts urge risk management and capital preservation

The VN-Index’s expected quick rebound from the recent slump has not materialized, with analysts saying the market needs more time and supportive factors to move higher. They also emphasized risk management, capital preservation, and maintaining market psychology during the downtrend.

On April 2, trading was cautious as early selling pressure emerged. The VN-Index fell into a volatile state after investor sentiment shifted toward a defensive posture. By the close, the main index again breached the 1,700-point level.

Pressure to resume a correction

Earlier, the market had a bullish session: the VN-Index gained more than 28 points on April 1, reclaiming the 1,700 level and raising expectations for a smoother month rather than a bull trap. However, history suggests April can remain unpredictable for Vietnam’s equity market. Over the past 25 years, the probability of the VN-Index rising or falling in April has been roughly 50/50, and in the last four years the market has declined in April.

Last year, a tax shock from the US in early April triggered one of the sharpest drops in Vietnam’s equity markets. Looking further back to 2022, April marked the start of a downtrend from a peak near 1,500, when the VN-Index briefly fell to around 900.

In the current environment, analysts pointed to geopolitical tension in the Middle East that eased at one point but later contributed to volatility across global financial and commodity markets. The shift followed a statement by US President Donald Trump that the US would continue military action until its goals are fully achieved, including a warning of strikes on Iran’s power plants if no deal is reached. This stance contrasted with the previous day’s comments, when Trump said Washington could withdraw from Iran within 2–3 weeks and that there was no longer a reason to continue the war.

Regional market reaction

Asian markets fell on April 2. In Korea, the Kospi dropped 2.82% and the Kosdaq fell 3%. In Japan, the Nikkei 225 declined 1.4% and the Topix fell 0.94%. The MSCI Asia-Pacific index (ex-Japan) decreased 0.75%.

Elsewhere, Australia’s S&P/ASX 200 reversed to a 0.48% decline after opening higher. Hong Kong’s Hang Seng fell 0.5%, while China’s CSI 300 was largely flat.

Preserving capital vs seeking profits

The outlook for a VN-Index rebound appears limited in the near term, with analysts saying the market likely needs more time and positive catalysts to rise. While FTSE Russell’s March review for an index upgrade may take place in early April, experts said it is largely a procedural step to confirm progress rather than a new decision, with limited impact in the short run.

April is also the peak season for annual general meetings. Ambitious plans, potential share issuances, and large dividend distributions could provide short-term support for stocks and the broader market, though such effects are cyclical and recur each year.

“Given equities are a risk-sensitive asset class, the more appropriate scenario now is that the panic phase may have passed, but heightened volatility may not have ended,” said Luong Duy Phuoc, Director of Analytics at KAFI Securities.

Portfolio and risk-management guidance

Tran Vinh Quang, a financial expert, said investors should rebalance portfolios, reduce leverage, and hold cash to preserve capital rather than chase profits during a downtrend. He argued that the most important objective in a downcycle is to maintain discipline and protect capital, with success coming from limiting losses rather than pursuing gains. “After a downcycle is typically a phase of accumulation before a new upcycle,” he added.

Quang also noted that investors should reassess their own holdings, since a downtrend affects portfolios differently. “A downtrend is not only about the overall index but also about each investor’s holdings,” he said, adding that investors should focus on the condition of their portfolios rather than debating the market’s general direction.

Psychological factors were also highlighted. Investors should determine how much capital they can withstand under a worst-case scenario and set appropriate cutoffs, with contingency plans if outcomes differ from expectations. Analysts said it is advisable to hold some cash and maintain limited market exposure, while controlling position size—especially leverage.

“In a disadvantageous market, no technical indicator can compensate the risk if leverage remains high. As the market begins to decline, the prudent move is to cut leverage and then reduce position sizes to increase cash weight,” the article noted, citing the broader risk-management approach.

Nguyen The Minh, Director of Analytics at Yuanta Vietnam, advised investors to avoid aggressively “catching the bottom.” He recommended deploying cautiously with low allocation, limiting leverage, avoiding “all-in” positions, and keeping room to respond if the market continues to swing.

— Hai Giang