In a recent report on Vietnam's financial market, a research team from the BIDV Training and Research Institute and the Asian Development Bank (ADB) assessed that there are several opportunities in Vietnam’s stock market when the the legal foundation is gradually improved and the market is increasingly transparent. Along with that, the economy is on strong recovery, which is a condition for the market to develop.
However, there still exist three major risks to Vietnam’s stock market, including the seemingly loose connection between the market and the real economy. When economic growth rate is low, stocks see the opposite. There may be a possibility of manipulating and making prices in this case.
Meanwhile, the bond market is potentially risky due to the lack of transparency, no credit rating agency, and the cancellation of several issuances of some companies that violate information disclosure.
In addition, that financial leverage increases rapidly may cause the market to fluctuate strongly whenever there are related events.
On the basis of assessing domestic and foreign influencing factors, the research team forecasts two scenarios for the stock market in 2022. Specifically, it is forecast that the VN-Index may increase slightly (+8% to 1,610 points), or may see a slight decrease (-4% to 1,440 points, under a negative scenario).
Along with that, the number of new account openings is forecast to increase by 20% and 30% respectively for the two scenarios, with market capitalization increasing by -4% and 8% respectively.
More specifically, for the stock market, after two years (2020 - 2021) of explosive growth in many aspects (size, liquidity, number of F0 investors), the market outlook in 2022 is forecasted to be morre stable and healthier.
Favorable factors for the growth of the market include the recovery of the domestic economy, which helps the profits of listed companies to improve sharply, and the large room for development when the Government accelerates the equitization of state-owned enterprises.
Vietnam’s stock market is still attracting capital flows from domestic investors when liquidity is maintained at a high level while interest rates have increased slightly but still at a low level. Meanwhile, the pressure to withdraw capital from foreign investors increased insignificantly due to the potential and the share prices in Vietnam's stock market are still attractive.
In addition to favorable factors, external risk factors can negatively affect the stock market. Due to increasing inflation, many central banks around the world are gradually tightening fiscal and monetary policy and raising interest rates to, which will create more pressure on interest rates to increase and lead to capital withdrawal of foreign investors.
Along with that, slowing growth in China, reduced demand for imports, investment and consumption, the Russia-Ukraine conflict, and sanctions disrupting supply chains are increasing inflation and instability in international financial markets.
The corporate bond market is forecasted to develop in a transparent and healthy direction.
However, the market is unlikely to increase as sharply as in the past 5 years when the regulations of the management agencies are issued in the direction of tightening to reduce risks and make the market healthy.
For the government bond market, the expected issuance volume in 2022 will remain unchanged from the previous year due to the lower maturity scale compared to previous years.
With the derivatives market, currently VN30 futures contract product is still the most liquid one while government bond futures contract product is not attractive to investors.
Therefore, according to the research team, in the near future, in order to attract domestic and foreign investors, it is necessary to diversify products by allowing trading of stock options and futures contracts on stocks, or new indexes other than VN30, and restructure products to increase liquidity.
However, these derivative products do not have a specific implementation schedule in 2022, it is likely that investors need to wait in the medium term.
The derivatives market is forecast to continue to grow in 2022, but at a lower and significantly less volatile rate than last year, with average trading value and open interest increasing by around 20%.
Compiled by VietnamCredit