Be wary of stock trading prior to the Tet holiday

VNDirect advises investors to exercise caution in the run-up to the impending vacation and to limit  the use of leverage (margin).

>> Positive news lifts the market's sentiment: expert

Fed slows rate hikes

The FED warned investors that the fight against inflation would continue into 2023 when it increased its fund rates by 50 basis points on December 14, 2022, a smaller increase than the 75 basis points observed in the prior boost.

In the first quarter of 2023, VNDirect anticipates two additional Fed rate hikes, for a total increase of 50 basis points. However, until the U.S. economy actually experiences a recession, it does not anticipate any rate cuts in 2023. With no recession expected, the Fed is expected to make its first gradual 25 basis point decrease in 1Q24.

Domestic interest rate hike slows down

Following the SBV's call, at least 12 commercial banks, including Vietcombank and Agribank, declared they would lower their lending interest rates to boost businesses. For loans in VND and for some current businesses and individual customers, the interest rate reduction is from 0.5% per year to 3.5% per year. According to the SBV, banks that have enough liquidity and have lending interest rates that are relatively low will be given bigger credit limit s than other banks.

Private banks' 3-month term deposit rates and 12-month term deposit rates increased by 6 basis points (bps) and 11 basis points (bps), (respectively) as of December 31, 2022, compared to the levels at the end of the previous month. In the months of November and December 2022, the interest rates on 3-month and 12-month term deposits at state-owned banks were unchanged.

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The Vietnam Banking Association has asked banks to lower 12-month deposit interest rates to a maximum of 9.5% per year. Some banks have dropped their 12-month deposit interest rates from over 10% per year to about 9.5% as a result of the call.

Weak swings in early 2023

VN-INDEX reached 1,007.1 points at year's end (-3.9% monthly, -32.8% annually). According to VNDirect, the following factors may be to blame for the market correction.

First, on the basis that the VN-Index had risen by about 20% from the low between mid-November and early December 2022, investors first realized profits.

Second, the week before New Year's Eve sees a general exodus of investors from the market.

Third, unfavorable macroinformation concerning exports and PMI data had an impact on investor mood.

VN-Index was trading at 10.5x trailing 12-month P/E as of December 30, 2022, which is 40% less than the top this year (17.7x) and 34% less than the 5-year average P/E (16.0x). According to VNDirect, low prices help Vietnam's stock market draw in international capital. Foreign investors have made net purchases of more than VND30,000bn (about US$1.3bn) on the Vietnamese stock market since the start of November 2022.

Although the VN-Index recovered to 1,060 points in early 2023, stock market liquidity was still poor before the Lunar New Year. VNDirect advises investors to exercise caution in the run-up to the impending vacation and to limit  the use of leverage (margin).

"In January 2023, we anticipate that the VN-INDEX will oscillate between 1,000 and 1,100 points. We advise investors to place a priority on income plays and inexpensive equities. Investors can also add stocks that profit from the narrative of public investment and the openness of China to the watchlist", said VNDirect.