Investors’ confidence in Vietnam’s stock market has been declining as fluctuations in the market continuously happened. Different factors impacted the market, including outside ones like the Russia – Ukraine conflict, the Fed raising the interest rate, China maintaining its Zero Covid policy; domestic ones such as economic crime cases, the crisis in the bond market, the tightened monetary policy, etc.
VN-Index plummeted from the peak of 1536.24 points on January 7, 2022, to the bottom of 873.78 points on November 16, 2022. That is equivalent to a decrease of 43%, with many sessions of record declines of 70-80 points.
Until this moment, 2022 has become the year with the highest number of sessions of VN-Index increase/decrease of 2% or more since 2009, although there are still 2 weeks left.
Although the market declined in scores and liquidity, many investment opportunities were still recognized throughout 2022 thanks to the diversified and circulating cash flow. Notably, in the last months of 2022, foreign capital inflows continuously poured into the market, along with more positive macro information. The Fed reduced the rate of the interest rate increase, and interest rates and the VND exchange rate both cooled down, the State Bank of Vietnam also continuously injects money through the open market operations to support the liquidity of the banking system.
As a result, Vietnamese investor sentiment is rekindled, with hope in the last days of 2022.
However, analysts assess that the Vietnamese stock market in 2023 will still be gloomy, especially when challenges await investors in the first 6 months of the year. For example, the US CPI is still high, the Fed will still raise interest rates, the risk of a global recession, geopolitical tensions in many regions, the process of restructuring the bond and real estate market prolonged production, delays in disbursement of public investment, the decline in export activity and difficulties in the job market.
It is forecasted that from now until the end of the year, the stock market will recover slightly and will not have much room for growth. The market is no longer volatile and can go up or down depending on information and economic conditions. In the coming time, if information about bond status is improved and capital structuring is bettered, the stock market will continue to rise. Besides, the US Federal Reserve (FED) and other central banks will reduce monetary tightening more than in 2022.
Thus, the pressure to raise interest rates is still there, but this pressure will be much lower than in 2022 when inflation can cool down. Geopolitical uncertainties no longer weigh on investor sentiment. Therefore, investors can shift cash flow from safe havens to other investment areas. In 2023, the strategy is to go for the bond or stock market.
Banking stocks will be notably promising in 2023. The health of Vietnamese banks has improved more than before. Banks still benefit the most when Vietnam's economy grows in the long term. The fact that the State Bank has just decided to increase the credit room by 1.5-2% in 2022 for the whole system of credit institutions has created a positive push for banking stocks.
It is forecasted that in 2023, profit growth of the banking industry will slow down and reach 10-12% over the same period in 2023-2024 as credit growth slows down, NIM narrows, and credit costs increase. Notably, about 46,000 billion VND of corporate bonds maturing in the first 6 months of 2023 will be a big challenge for the financial system.
However, in the second half of 2023, the situation will become more positive when interest rate risks and exchange rate tension are eased, and the problem of liquidity stress is partly solved thanks to the promotion of disbursement of public investment by localities.
In the long term, banking stocks will be an attractive investment opportunity thanks to the strong digital transformation in the banking system. Many banks are gradually forming an ecosystem of banking, securities, and insurance with 4.0 technology financial products to help increase surplus value.
Along with that, the size and financial capacity of banks are also being promoted thanks to accumulated profits and the process of raising capital and issuing to strategic partners.
Compiled by VietnamCredit