Opportunities for stock market in Vietnam

Several trading sessions surpass US$1 billion

In the first two months of 2024, with savings interest rates hitting record lows, the VN-Index soared by over 130 points (12 percent), fueled by a significant influx of idle funds back into the stock market. Specifically, in February 2024, the average trading value across the three exchanges (HOSE, HNX, and UpCOM) reached VND21.3 trillion per session, up 26.2 percent from the previous month. Notably, HOSE witnessed a trading session value of up to VND32 trillion (on February 23), with several sessions recording liquidity surpassing $1 billion. Additionally, the market capitalization of HOSE surged by approximately VND550 trillion ($23 billion) in the first two months of the year, reaching nearly VND5 quadrillion.

The stock market's surge is driven by the strong business performance of listed companies. Data from brokerage firms reveals that nearly 1,200 companies (representing 96 percent of market capitalization) saw their fourth-quarter 2023 net profits surge by an estimated 30 percent compared to the same period in 2022. Specifically, the banking sector experienced a 22.5 percent year-on-year increase in net profits in Q4-2023, leading to the recent momentum on the stock market. Furthermore, the real estate sector's outlook has improved. Although net profits in Q4-2023 declined by 19.6 percent compared to the previous year and by 24 percent compared to the previous quarter, much of this decline can be attributed to Vinhomes (VHM). Excluding VHM from the statistics, the real estate sector's net profits would have surged by about 132 percent compared to Q4-2022. SSI Securities Company forecasts that this profit growth will drive exceptional stock performance in 2024.

Moreover, record-low interest rates will be a key driver of growth for the stock market, especially for individual investors. "Bank deposits continue to rise as other investment channels remain relatively limit ed. Gold has seen considerable gains, while real estate and corporate bonds require more time to rebound, potentially leading this capital back to the stock market in 2024. With individual investors contributing over 90 percent of the total daily trading volume in 2023, we predict that the VN-Index will experience significant jumps in 2024 due to this capital flow," noted an SSI expert. Indeed, the increasing participation of individual investors in the stock market is evident in reality.

Figures from the Vietnam Securities Depository and Clearing Corporation reveal that as of the end of January 2024, the number of domestic individual investor accounts surpassed 7.35 million, marking an increase of over 125,000 accounts compared to the end of 2023.

Efficient capital channel

During a recent conference on implementing the development tasks of the stock market in 2024, Prime Minister Pham Minh Chinh emphasized Vietnam's aim to become an emerging market by 2025. This would contribute to the goal of attracting approximately $25 billion in indirect foreign investment annually, equivalent to direct investment. The Prime Minister also highlighted that economic development relies heavily on the stock market, serving as a crucial channel for both medium and long-term capital for the economy. Playing the role as the "thermometer" of the economy, the stock market is a flexible and attractive investment channel for institutions and individuals.

Regarding foreign investment capital flow, although foreign investors resumed net selling with an outflow of VND2.77 trillion in February 2024, they also recorded a net inflow of VND185 billion in January 2024, ending a streak of nine consecutive net selling months (accumulating nearly VND22.6 trillion in net outflows throughout 2023). Investment funds assess that foreign capital will return to the Vietnamese stock market in 2024 following the gradual easing of interest rates by the FED and the prospects of upgradation for the Vietnamese stock market in 2024-2025. According to the 2024 strategic reports from brokerage firms, some sectors expected to witness significant recovery include steel, retail, and securities. Additionally, the information technology and industrial real estate sectors are also optimistic based on their long-term growth potential.

Mr. Le Anh Tuan, Director of the Securities Division at Dragon Capital, assesses that the VN-Index is currently in a recovery phase, driven by factors such as low interest rates, stable macroeconomic conditions, and a resurgence in profit growth. During this recovery phase, high-yielding sectors include non-essential consumer goods, real estate, and banking and finance. Petri Deryng, Founder and Manager of the Pyn Elite Fund, also expresses optimism about the stock market this year, citing stable monetary markets, banking liquidity, and attractive interest rates. "Listed companies are expected to achieve over 20 percent profit growth this year, and we are particularly bullish on the banking sector," Petri Deryng added.