The stock market on March 6 reversed, decreasing over 7 points after nearly 2 weeks of continuous “green wave”. Liquidity remained high with nearly 28,000 billion VND. If there were no system congestion on HoSE in the afternoon session, the trading value could have been even higher as many investors wanted to buy stocks but couldn’t place orders.
According to experts, the market’s correction for a rest is reasonable after the continuous recovery and growth from the end of last year to now.
Rapid rally
Speaking at a stock market talk show with the theme “Embracing the Upgrading of the Stock Market” organized by the Labor Newspaper on the same day, Mr. Phan Dung Khanh, Chief Investment Advisor of Maybank Securities Company, assessed that the increase of about 250 points (nearly 25%) of VN-Index from October last year until now has brought quite high profits for investors.
The market’s rally came from many supporting factors. Domestically, the State Bank has reduced the policy interest rate for 4 times, commercial banks have reduced deposit and lending interest rates. The economic indicators have gradually tended to be positive towards the end of the year.
Speakers exchange at a stock market talk show with the theme “Embracing the Upgrading of the Stock Market,” organized by Labor Newspaper on March 6. Photo: THANH THANH
Internationally, the biggest expectations of investors are that the Federal Reserve (Fed) and the European Central Bank (ECB) will start reducing interest rates; the US and Japanese stock markets have continuously set historical highs… have positively impacted the Vietnam stock market.
Ms. Ngo Huong Thao, an investment advisor at Mirae Asset Securities Company, believes that the Fed’s signaling the start of interest rate reduction will contribute to reducing pressure on the USD / VND exchange rate. The loose monetary policy of the State Bank also stimulates capital flow into the stock market.
The solutions to remove difficulties in the real estate market and bonds in order to attract capital for the economy also help investors gain confidence in an upward trend of the stock market.
Especially, the determination of the Government and management agencies to upgrade the market and put the KRX system into operation further strengthens the confidence of domestic and foreign investors.
Thao cited that, in the period from October to November last year, the stock market had a very negative performance when the USD / VND exchange rate heated up, the management had to issue treasury bills to attract the VND back to stabilize the USD price in the country.
However, at the current time, the exchange rate is quite hot when the central exchange rate exceeds 24,000 VND / USD, USD prices at commercial banks are around 25,000 VND and the free market USD price exceeds 25,500 VND, but the stock market is almost unaffected.
Mr. Nguyen The Minh, Director of Analysis of Yuanta Securities Vietnam, analyzed that the exchange rate of the VND / USD touched 25,000 VND / USD last year, negatively impacting the stock market, but the current context is different. There is consensus on monetary policy between Vietnam and large markets, especially the US after the Fed signaled a rate cut, instead of counter-phased as before.
In addition, the economic prospects of 2024 are brighter when Vietnam is an attractive destination for foreign investment capital, and business activities of enterprises are also more optimistic.
“The resumption of net buying of stocks by foreign investors after about 2 weeks, even though not entirely positive, but to some extent, has made foreign investors begin to see the growth opportunities of the Vietnamese market” – Minh said.
According to statistics, in about 4 years (2020 – 2023), foreign investors only net bought for 1 year, the rest was net selling. In particular, in 2023, the net selling volume was very large. Therefore, the resumption of net buying by foreign investors is a positive factor supporting the market.
Upgrading to attract foreign capital
At the conference on implementing stock market tasks in 2024, Prime Minister Pham Minh Chinh directed the ministries to vigorously promote measures to upgrade Vietnam’s market from emerging to frontier market in 2025.
According to the World Bank’s calculation, if upgraded to a frontier market, Vietnam’s stock market could attract 25 billion USD of indirect investment capital from international investors poured in until 2030.
Mr. Phan Dung Khanh also agreed that one of the biggest benefits of upgrading is attracting more foreign capital. Currently, the proportion of foreign investment trading is about 10% – 15% of the total stock market, whereas this figure used to be 30% – 40%.
“To create attractiveness for the stock market to meet the conditions for upgrading, it is necessary to supplement high-quality goods which are technology companies, artificial intelligence, green and clean energy… to attract foreign capital” – Khanh said.
How to absorb billions of USD of foreign capital flowing into the market and businesses when upgrading is also a problem. Currently, the ownership ratio of foreign investors in many listed companies is very low, and companies with high foreign capital ratios are prone to disputes.
Thao said that recently there has been a proposal related to non-voting deposit certificates that can be a step to make the market more flexible. At the same time, it is necessary to improve the quality of listed companies, make disclosure information uniform to narrow the gap between foreign and domestic investors to make foreign capital flow more strongly.
Mr. Nguyen The Minh analyzed the upgrading roadmap of Vietnam’s stock market is still stuck in technical stages such as consideration by index funds, examination of capitalization, liquidity, the proportion of shares that investors can buy and sell, the proportion of foreign investors…
When upgrading, the criteria for capitalization and liquidity will be a plus for large-cap stocks, sectors with large market capitalization such as banks, real estate, food production, and transportation.
Upgrading will also affect the liquidity of the market, the liquidity of large-cap stocks when foreign investment funds trade more.
Along with the upgrade, the new KRX system being tested also brings many expectations for investors. Minh believes that the KRX system is not a “magic wand” to help upgrade the market, but when this system operates, it will contribute to meeting the demand for large-scale transactions, increasing derivative products, thereby supporting the upgrading process; creating peace of mind for foreign investors and individuals in trading to avoid order congestion as in the past.
Still risky
Although the stock market has been continuously increasing, the characteristic is that the assets of many investors have not increased, even lost. According to experts, this originates from the fact that the market’s uptrend has mainly focused on strong increases in blue chip stocks, large-cap stocks and alternating momentum among stock groups, instead of a widespread increase.
Mr. Nguyen The Minh believes that after many months of continuous growth, the pressure to take profit is unavoidable and investors will have the mentality of “just waiting for bad news to sell”.
Data released by the State Bank shows that the amount of savings deposits in the banking system in 2023 was at the highest level in history. The picture of the first months of 2024 is similar, when interest rates are low but bank deposits are still high.
Mr. Phan Dung Khanh assessed that this development shows that many investors are still worried about overheated investment channels such as stocks, gold… so they do not dare to pour too much money into them.
“The liquidity in the market is gradually improving, but if compared to the time when the VN-Index peaked at the 1,500-point range, with a trading value of up to 1.5 billion USD/session, the current trading value is still far behind. Investors need to be aware of this to avoid being too enthusiastic about the market. The overall trend is still positive but there will be unexpected declines” – Khanh said.
