How will macroeconomic conditions affect the Vietnamese stock market?

Continued Volatility in the United States

As the USD Index continued to increase, there were some less encouraging events in Asian currency rates over the last week. In addition, the Federal Reserve's interest rate decision this week was significant.

The Fed kept interest rates constant at 5.25-5.5%, as predicted, and its revised predictions indicate that the US economy is robust enough to survive the challenges associated with tighter monetary policy. This opens the door to another rate rise during the November meeting.

Looking at economic statistics from the United States, certain inferences have been reached about the decreasing probabilities of a recession. It may not happen in the coming year, or perhaps the following year, as the US economy stays strong, notably in the labor market and consumer spending, which remains strong. As a result, the US economy should escape a short-term recession.

On a related issue, some investors predict the Fed will raise interest rates again in November, causing additional turmoil and posing new hurdles to the US economy and businesses.

In terms of long-term patterns, inflation in the United States is projected to stay low until there are big changes in oil prices. Global investment funds have diverse perspectives on energy pricing. Some predict that oil prices will hit $100 per barrel by the end of 2023 or early 2024, while others feel that this would result in major price changes without creating a new focus point. As a result, inflationary pressures, particularly core inflation, are projected to remain under control in the long run.

One noteworthy event in the previous month has been the tightening of oil supply, which is projected to result in a scarcity of oil in the fourth quarter of 2023 and drive oil prices to new highs. This is good for oil and gas firms, but high oil prices, along with high loan rates, may put short-term pressure on industries that rely on oil as a raw material.

As a result, some volatility in August and September is unavoidable, particularly following seven months of tremendous expansion in global and US stock markets. Many expectations have already been priced in, so the September volatility may present new buying opportunities in the fourth quarter, when the attention will move to possibilities for 2024.

Vietnamese Stock Market Fluctuations

In late Q2 2023, industrial output in Vietnam is improving, and imports and exports have showed significant improvement. Imports are forecast to fall by 0.6% in the current quarter compared to the same period last year, while exports are expected to fall by 2.8%. As new orders and industrial output show indications of recovery in Q3, this suggests that Vietnam's need for new raw materials is growing.

According to data issued by the Vietnamese Customs in the first half of September, exports totaled $14.3 billion, a 12% increase over the same time last year, while imports were roughly $14 billion, a 0.4% increase year on year. The trade surplus for the first half of September is $0.5 billion. Year to far, exports totaled $242 billion, an 8.8% reduction from the same period last year, while imports totaled $222 billion, a 15.5% decrease from the same time last year.

Based on statistics from the beginning of the year, Vietnam is running a trade surplus of almost $20 billion, which is likely to be maintained through the end of the year. This is a key aspect, along with the State Bank of Vietnam's initiatives to encourage foreign inflows, in stabilizing the currency rate.

The foreign currency rate, notably the VND/USD rate, has currently climbed to 24,345 dong, a considerable increase from the prior range of 23,500 to 23,800 VND/USD. Experts feel that exchange rate pressures are typical throughout Asia, since other currencies such as the Chinese Renminbi and the Japanese Yen are also under pressure as a result of the USD's recent surge.

The Federal Reserve's recent moves have strengthened the USD while causing turmoil in global markets, placing selling pressure on high-risk assets such as digital currencies and stock markets.

As can be observed, Vietnam has not been subjected to as much pressure as other nations following the last Fed meeting, and the action by the State Bank of Vietnam was opportune in terms of stabilizing investor mood in the context of Vietnam's relatively modest credit growth.

Credit growth in the banking sector as a whole is currently at 6%, much below the projected range of 12-14%. This shows that new borrowers are cautious in the present economic situation, and they may be waiting for more interest rate cuts before expanding their loan demand. This is one of the reasons why bank earnings from net interest income remain lower than in the same time last year, since funds have not poured into this sector in large amounts.

Looking at the recent movement of money in the stock market, the banking sector remained relatively stable over the lengthy bull market stretch from Q2 to July. If the macroeconomic outlook improves, the financial sector may still play a supportive role.

In terms of the macroeconomic forecast, HSC has proposed scenarios that imply certain improvements, and the publication of Q3 macroeconomic data is expected to be the main point for the week.

HSC predicts GDP growth of 5% in Q3 compared to the same period last year, up from 4.1% in Q2. The resurgence of industrial output and foreign commerce is driving this expansion. Given Vietnam's reliance on exports and imports, these variables are critical for the Vietnamese stock market's long-term development.

The stock market has just seen a substantial fall. When compared to the loss in Asian nations in the early trading sessions of this week, Vietnam's VN30 index is under the most severe pressure, while China's main indices only fell by 0.54%, the Hang Seng index fell by nearly 2%, and the Taiwanese stock market climbed by 0.66%.

In actuality, Vietnam still has a narrative to tell about AI, chips, energy conversion, and electric cars, which is enough to keep the technology industry in the limelight, as it has in recent years.