Vietnam’s stock market offers new opportunities

06:00 | 01/03/2021 Trade

(VEN) - Despite the impact of the Covid-19 pandemic, Vietnam’s stock market maintained stable operations with increasingly improved liquidity in 2020. Its performance contributed to supporting the business community and reassuring investors. The stock market continues to offer new opportunities in 2021.

vietnams stock market offers new opportunities
The Vietnamese stock market faces a successful year in terms of size and quality

Stable development

Tran Van Dung, chairman of the State Securities Commission of Vietnam, said Vietnam’s stock market plummeted at the beginning of 2020 as the Covid-19 pandemic pushed foreign investors into the net short position. But the market recovered in the final months of the year, with the VN-Index rising 14.9 percent compared to the beginning of 2020 and 67 percent against the rock bottom recorded in late March. The liquidity of the stock market improved significantly to an average trading value of nearly VND7.4 trillion, with the November and December average at VND10 trillion and VND14.8 trillion per trading session, respectively. The capitalization of Vietnam’s stock market also climbed to 84.3 percent of gross domestic product (GDP).

Total capital raised through the stock market hit VND384 trillion in 2020, a year-on-year increase of 20 percent. About 84 percent of large-scale public companies generated profits, a high rate amid the Covid-19 pandemic.

The bond and derivatives markets also recorded impressive growth. The State Treasury of Vietnam raised VND333 trillion through government bond auctions in 2020, an increase of 64 percent compared to a year ago, while the figure from the corporate bond market stood at VND400 trillion, equivalent to 14.7 percent of the overall GDP. Deposit interest rates declined from 4.51 percent per year in 2019 to 2.83 percent per year in 2020.

The positive results were attributed to the efforts of the State Securities Commission of Vietnam in issuing market-supportive policies and devising solutions to overcome difficulties facing businesses.

New opportunities

The Vietnamese stock market may experience complicated developments in 2021, depending on how the Covid-19 pandemic develops. In the face of the long-term impact of the pandemic, the world economy in general and the Vietnamese economy in particular need to be vigilant and wary.

With experience and initial success in preventing the spread of Covid-19, and the current economic potential, the Vietnamese stock market has been afforded new opportunities.

The new Law on Securities, Law on Investment and Law on Enterprises officially took effect on the first day of 2021, making the legal framework and investment environment more synchronous and transparent.

Dao Hong Duong, director of the PetroVietnam Securities Incorporated (PSI) Analysis Center, said governments and central banks around the world are pursuing an expansionary monetary policy and continuing to issue stimulus packages in order to promote post-pandemic economic growth. The Vietnamese stock market, therefore, will benefit from these factors.

As other investment channels, such as savings and gold, become less attractive in the eyes of investors due to lower interest rates and stagnation in the uptrend of gold prices, big money flows are being pumped into the stock market.

The State Securities Commission of Vietnam is planning additional solutions to develop the Vietnamese stock market further and improve its resilience. Specifically, the commission will continue to improve the legal framework and policies for the development of the Vietnamese stock market, including detailed instruction on the implementation of the 2019 Securities Law.

In addition, the commission will continue implementing synchronous measures and address market weaknesses so that Vietnam’s stock market can be upgraded from a frontier market to an emerging market.

Minister of Finance Dinh Tien Dung forecasts a successful year for the Vietnamese stock market in terms of size and quality. It will continue to be an efficient capital mobilization channel for Vietnam’s economy and a useful instrument for macroeconomic government management, Dung said.

Thanh Thanh