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The capital market in 2020: Opportunities and risks

The capital market in 2020: Opportunities and risks

Monday 16, 03 2020
Enterprises are still facing difficulties in finding medium and long-term capital. So according to your assessment, how has the current situation improved?

The capital market in 2020 is expected to have positive changes with cash flow from foreign investors, as well as the equitization and the divestment of state-owned enterprises.

However, less than 2 months of the COVID-19 outbreak, many economic sectors across the globe have been stalled and suffered heavy losses. The stock index of many exchanges across the globe is continuously losing points, and the gold prices are spiking.

These fluctuations have had certain impacts on Vietnam's financial market. So how will the capital market potentially look like in 2020? On this topic, there has been an interview with Mr. Nguyen Tri Hieu, an economist.

How do you assess the movements of global financial markets over the past time?

The financial market entered 2020 with many unpredictable changes. A series of major indices of the global stock market is continuing to decline due to the worry of the COVID-19 epidemic. The fluctuations of the market are difficult to predict in the coming time when the disease has not been controlled.

In fact, right at the beginning of 2020, domestic financial experts have made very positive comments on the world economy and Vietnam's economy. These comments were made based on the positive figures such as Vietnam's GDP in 2018 and 2019 exceeding 7%, or the controlled inflation of 2.76% in 2019.

These are the pillars of the Vietnamese economy to continue its growth momentum when entering 2020. However, the outbreak of COVID-19 has damaged many economies across the globe, including that of Vietnam.

How has this situation affected Vietnam's financial market?

Vietnam has strengths in import and export, and in 2019 the total turnover reached more than US 500 billion $. Vietnam's economy relies heavily on imports and exports, which can be considered a bright spot in Vietnam's economy.

However, the Chinese economy, which is now considered a global factory, is being stalled by an outbreak that has had a negative impact on many countries around the world, including Vietnam. This makes the world economy and Vietnam's economy stand in the imbalance between goods movement and monetary movement.

In addition, the disease has also caused the world stock market to plummet due to investors' sentiment which has caused many stocks to be sold off. In the context of less optimism of the global financial market, the Vietnamese stock market has also been affected. At a time, foreign investors net sold for many sessions, causing the VN-Index to decline.

However, I think that if the disease is controlled better, in the near future, the global stock market and Vietnam stock market will also recover.

It has been a fact for a long time that Vietnam's economy depends too much on credit.

Enterprises are still facing difficulties in finding medium and long-term capital. So according to your assessment, how has the current situation improved?

Vietnam's economy is heavily dependent on credit. In 2019, the total outstanding loans reached VND 8.2 million. Currently, the Government, the State Bank, and other economic sectors are seeking ways to minimize the economy's dependence on credit.

In the coming time, the economy will continue to be difficult if the disease is not controlled, but in the context of global difficulties, it will also open opportunities for Vietnam to reduce its economy’s dependence on credit.

The capital market in 2020: Opportunities and risks

Recently, besides the good results of the Government bond market, corporate bonds have also had a year of strong fluctuations. However, besides the opportunity, there are also warnings about risks. How do you comment on this issue?

Minimizing the economy's dependence on bank loans is always seen as a positive sign. The active issuance of bonds of businesses is also a form of debt, but instead of going to banks, businesses issue bonds to the public and investors.

However, the issuance of corporate bonds in parallel also brings risks. For example, some issuing businesses could use the capital for the wrong purpose or too much debt can lead to default, which can affect the economy.

It is a fact that many investors do not have the ability to analyze finance or invest because seeing high profits may bring great risks. These risks are not only present in Vietnam but also in all economies and the global financial market.

Can you make an assessment and comment on the prospects of Vietnam's capital market in 2020?

The current disease situation is causing many foreign investors in the Chinese market to find alternative markets and shift production to neighboring countries, including Vietnam. Vietnam is in good shape to be able to take on new opportunities.

Good disease control will create confidence for foreign investors if they move to Vietnam. In addition, in 2019 Vietnam attracted a positive amount of foreign investments, along with which is the good absorption capacity of the Vietnamese economy, which also brings positive signals for the capital withdrawal in 2020.

Thank you very much!

​>> Economic risks of 2020: Be aware of company debts


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