Five main factors to drive the Vietnamese stock market

After the swings in 2Q24, the main trend of the Vietnam stock market in 3Q24 is recovery, underpinned by cooling exchange rates, a strong uptrend in the global stock market, and a promising semi-annual earnings season. For the whole 3Q24, the VN-Index gained 3.4% in points and dropped 21% in total trading value.

KB Securities believed that there would be five main factors to drive the trend of the Vietnamese stock market, including:

First, it slightly lowered the average EPS growth forecast of enterprises listed on the HSX to 13% (from 14% in the last report). This is still a high growth rate that continues to support the general market trend in 4Q24.

Second, the Fed's rate cut cycle has started since the 50 bps cut at the September meeting. This benefits the Vietnam stock market in three ways: (i) The cooling pressure on exchange rates helps the SBV return to the policy of maintaining low interest rates. (ii) The trend of rate cuts simultaneously in many central banks facilitates a large amount of low-cost capital to approach emerging markets, including Vietnam. (iii) The US consumption demand is expected to be promoted, which will motivate Vietnam's export sector and GDP growth.

Third, given the strong decline of the DXY before the Fed's rate cut and the balance between foreign currency supply and demand in the banking system, USD/VND rates have plunged and been far from the intervention threshold of the State Bank of Vietnam (SBV). Accordingly, the SBV may stop intervening in the market to protect the VND as it did in 2Q24 and early 3Q24 via selling foreign exchange reserves, withdrawing Treasury bills, and raising OMO interest rates. Therefore, the average interest rate in the economy is expected to stabilize at a low level, although there may still be differentiation and slight increases in some small and medium-sized banks due to year-end credit demand.

Fourth, the US election between the two candidates, Donald Trump and Kalama Harris, is taking place fiercely, with the probability of winning being 50:50. The scenario of Trump's re-election may bring many risks to the Vietnam stock market as trade protectionism may strongly return, and our country may be targeted due to its high trade surplus with the US. Fiscal policies under Trump’s government may make US inflation difficult to control, hindering the Fed's interest rate cut. Lastly, the unstable political environment under Trump and unpredictable policies will cause risk appetite to drop.

Fifth, the sagging of the Chinese economy has become increasingly evident in the past quarters. Supportive policies have been introduced and are expected to have positive impacts in the short term. However, these policies are considered difficult to reverse the downward trend of this country’s economic growth in the medium term due to obstacles from structural factors such as population aging, oversupply of real estate in the suburbs, declining consumption demand from export markets, and high corporate and government debt. This is also a risk factor for the Vietnam stock market due to the high interconnection between the two economies.

For the market outlook in the last months of 2024, as the macroeconomic situation, exchange and interest rate trends, and profit growth of listed companies are still up to expectations given in the Report on Stock Market Outlook 2H24, KB Securities keeps its forecast for 2024 VN-Index at 1,320 points, corresponding to a market P/E of 15x and EPS growth of HSX enterprises increasing by 13% YoY.