A new push for the Vietnam stock market

Impact from Typhoon Yagi

Previously, global indexes of stocks rebounded by more than 3% owing to a boost from the US and European stock markets. This was prompted by investors' anticipation that the FED would follow the European Central Bank (ECB) in lowering interest rates, as the ECB had already slashed rates for the second time this year.

Meanwhile, the Vietnam stock market remains dismal, with trade lethargic and liquidity at its lowest level since the beginning of the year. According to HSX statistics, the value of transactions in the trading session on September 12 was just VND9,200 billion, which was 50% lower than the previous average. The VN-Index reached 1,238 points before rebounding. Stocks in the VN30, Midcap, and Smallcap categories have all been steadily declining for some time. This makes investors believe it is tough to benefit from the market.

When everything was in confusion, Typhoon Yagi came. This storm had a detrimental influence on 26 Vietnamese northern provinces and cities. According to some estimations, the impact of this storm might reduce Vietnam's GDP growth in the third quarter of 2024 by 0.35% and GDP in the fourth quarter of 2024 by 0.22% when compared to the non-storm scenario.

Many companies and individuals have suffered significant losses as a result of this disaster. The insurance sector has projected that it would have to pay up to VND 7,000 billion and is still working with insurance purchasers to determine the precise amount. As a result, the insurance cost is most likely significantly larger. This reimbursement will mostly come from non-life insurance firms and reinsurers. This amount would undoubtedly lead insurance firms to incur significant losses in the fiscal year 2024, maybe extending into 2025.

The curious thing is that the prices of insurance stocks have barely declined in recent days. From an investing standpoint, this price range is inappropriate, and investors should rethink not just insurance firms but also companies that have been directly or indirectly impacted by Typhoon Yagi.

New "push"

The Vietnamese stock market unexpectedly recovered strongly in two trading sessions on September 17 and 18, bringing the VN-Index back to 1,280 points as investors anticipated the Circular amending four circulars related to foreign institutional investors' ability to buy stocks without pre-funding and the roadmap for information disclosure in English.

As expected by investors, the Ministry of Finance has recently issued Circular 68/2024/TT-BTC, which amends and supplements a number of articles in the circulars governing securities transactions, clearing and settlement of securities transactions, securities company activities, and stock market information disclosure.

Nguyen Huu Binh, a stock expert, stated that this circular would be a fresh "boost" to assist the Vietnamese stock market achieve FTSE Russell's conditions for upgrading to an emerging market. SSI maintains that Vietnam will be upgraded during the September 2025 assessment session. According to preliminary projections from SSI, with the upgrading to an emerging market, cash flows from ETFs might reach up to USD 1.7 billion, excluding cash flows from active funds. Beneficiaries include: VNM, VHM, VIC, HPG, VCB, SSI, MSN, VND, DGC, VRE, and VCI.

Two market scenarios

On September 18, the VN-Index finished at 1,264.9 points, up 0.47% but well behind its top of 1,271.7 points. Increased selling pressure slowed the market's expansion, although demand did not increase significantly. The market maintained its upward trajectory, and it is difficult not to highlight banking companies such as VCB, BID, and CTG, which contributed up to 5.86 points. However, the number of stocks gaining did not outweigh the number of stocks declining, and liquidity increased strongly but not dramatically. This will undoubtedly provide upward pressure in the future sessions.

"Without funding from foreign investors, markets may struggle to continue the upward trend shown in the previous two days. In the context of Circular 68/2024/TT-BTC, which was recently released by the Ministry of Finance, and the FED's 0.5% rate drop, the VN-Index can only reach or above 1,280 points in the short term, after which the market will move sideways down. In a less optimistic scenario, Nguyen Huu Binh predicted that the VN-Index will rebound to 1,250 points, if not beyond it.