Market see upswing in H2, bolstered by lower interest rates and recovering corporate earnings

Analysts on the trading floor of VNDirect Securities Co. VNDirect Securities said that the main growth driver for Việt Nam's economy in the last six months of 2023 is the Government's economic support policies, including loosening monetary and fiscal policies. — Photo courtesy of VNDirect

HÀ NỘI — With the expectation that interest rates will continue to fall in the coming quarters while corporate profits begin to recover, brokerages forecast that the Vietnamese stock market will be uplifted in the second half of 2023.

In a recent report, VNDirect Securities said that the main growth driver for Việt Nam's economy in the last six months of 2023 is the Government's economic support policies, including loosening monetary and fiscal policies.

VNDirect expects the Vietnamese economy to recover in the second half of 2023 with a growth forecast for the second half of this year of 7.1 per cent, thereby raising GDP growth for the whole year of 2023 up to 5.5 per cent.

Regarding interest rates, deposit and lending rates will maintain a downward trend in the second half of the year. The average deposit interest rate of 12 months will decrease to 6.0-6.5 per cent per year by the end of 2023. Lending interest rates may decrease significantly in the second half of 2023 due to the capital cost of commercial banks decreasing, thanks to the State Bank cutting the operating interest rate in the first half of 2023.

However, VNDirect noted that the USD/VNĐ exchange rate will fluctuate more strongly in the second half of 2023 as the US Fed's operating interest rate remains at its high until the end of 2023 or longer to curb inflation. However, the exchange rate is expected to fluctuate no more than /-2.0 per cent compared to the beginning of this year.

Solutions from both monetary and fiscal policies will put Việt Nam's economy back on track and start a new growth cycle, VNDirect said.

Regarding the stock market, the analysis team said that the cash flow into the market started to recover, showing that investors' confidence in the market is gradually improving. “Therefore, VNDirect believes that this is the right time for investors to return to the market and build investment portfolios and anticipate a new growth cycle.”

“We think the VN-Index could reach 1,300 points in the second half of 2023, corresponding to a P/E in 2023 of 13.3 times", said VNDirect.

KB Securities Vietnam (KBSV) forecasts that deposit interest rates at banks will continue to decline from now until the end of this year, with the 12-month average deposit interest rate of commercial banks at around 6.7 per cent, down 1.3 percentage points compared to the beginning of the year. Lending interest rates will also decrease compared to the beginning of 2023 by 1 to 1.3 percentage points.

One of the biggest risks that Việt Nam's stock market will continue to face in the second half of the year is that interest rates in the US remain high, increasing the risk of a recession there.

Accordingly, KBSV forecasts that the economy of Việt Nam as well as the stock market will be negatively affected by the decline in investment inflows, weak exports and poor business results of listed companies.

KBSV forecasts that by the end of 2023, the VN-Index will reach 1,240 points. The company reduced the average profit growth forecast of companies listed on the Hồ Chí Minh Stock Exchange from 5 per cent to 0.5 per cent.

"The domestic macro context will only really improve from the fourth quarter, while the second and third quarters will continue to face potential risks,” it said.

KBSV increased its forecast for the VN-Index's reasonable P/E range from 14.3 times to 15.5 times.