Vietnam’s stock market forecast to expand toward year’s end

09:27 | 08/10/2019 Finance - Banking

(VEN) - The Vietnamese stock market fluctuated in the first seven months of 2019, but prospects for the market in the last months of the year are looking up.

vietnams stock market forecast to expand toward years end

General liquidity at low level

By the end of July 2019, there were 401 items listed on the Ho Chi Minh Stock Exchange, including 380 stocks, three closed-fund certificates, two exchange-traded fund certificates and 16 covered warrants. The VN-Index reached 991.66 points, an increase of 11.11 percent compared to the end of 2018. From January 1 to July 31, 2019, the VN-Index reached a high of 1,011.86 points on March 18, and a low of 878.22 points on January 3.

In July, the average trading volume reached 160.93 million shares per session with an average value of VND3,954.09 billion per session, a drop of 1.56 percent in volume and an increase of 3.26 percent in value compared to the previous month.

In general, market liquidity remained low and almost all stocks fell to the lowest price range since the beginning of 2019.

However, Phan Dung Khanh, investment advisory director of the Maybank Kim Eng Securities Company, said investor confidence has been restored by the decision of the US Federal Reserve (FED) to maintain stable interest rates and to consider further rate cuts this year to boost the economy.

In addition, the EU-Vietnam Free Trade Agreement (EVFTA) is forecast to have a positive effect on the Vietnamese economy, thereby positively affecting the stock market through a group of beneficiary shares, such as textiles and fisheries. The EVFTA as well as US-China trade conflict can help Vietnamese goods access new markets. It is hoped that these positive factors at home and abroad, together with the stable growth of the economy will help the stock market increase in the last months of the year.

Optimistic prospects

The Vietnamese economy is expected to grow by around 6.8 percent this year, while inflation will be controlled at a low level. Private investment will probably decrease in 2020, but an increase in public investment in a series of large projects such as the North-South Expressway and Long Thanh Airport will be a driver for economic growth. Exports to the European market are forecast to increase by about 20 percent in the first year after EVFTA takes effect (in 2021). These factors will contribute to promoting the development of the stock market.

Due to the US-China trade war, the trade surplus between Vietnam and the US has surged. Vietnam is being provided with opportunities to participate more deeply in the global supply chains. However, there are concerns that Vietnam will become a transshipment point for Chinese exports to the US.

According to the Rong Viet Securities Corporation, such risky commodity groups include photographic equipment, iron and steel, wood, plastics, vehicles, fabrics and animal products. However, given that their turnover is only 1-2 percent of total export turnover to the US, they will not create a major risk for listed businesses.

Chidu Narayanan, a senior economist in charge of Asia at Standard Chartered Bank, forecast the USD-VND exchange rate at VND23,100 per dollar by the end of 2019, and VND23,000 per dollar in mid-2020. Standard Chartered’s economists anticipate the Vietnamese dong will remain supported near-term by a stable current account surplus and strong foreign direct investment (FDI) inflows. The risk of strong depreciation in the last months of 2019 is not great, creating confidence for investors to promote long-term investment in the stock market.

The Vietnamese government is pursuing a policy of ensuring the stability of macroeconomic growth. Despite the

volatile global trade picture, the domestic macro environment still ensures favorable conditions for local businesses.

The slowdown of the stock market in the short term is an opportunity for investors to accumulate stocks in industries

regardless of the abnormal fluctuations of global trade.

Ngoc Thao