Opportunities for Vietnam as Global Inflation Cools

As global inflation levels off, the globe becomes "easier to breathe." Geopolitical tensions in 2022 and 2023 produced a sharp spike in inflation, pushing major central banks throughout the world to tighten monetary policy. Inflation, on the other hand, has now obviously maintained a declining trend.

According to Bui Hoang Minh, HSC Securities' Head of Analysis and Investment Advisory, as supply and demand stabilize, commodity prices have recovered to normal levels, with some even exceeding pre-Covid-19 levels. As a result of lower input costs and lower inflation, the prospects for global economic recovery are becoming clearer. If this cooling trend continues without more shocks until 2024, it will make household and personal spending "easier."

This overall scenario is one of the reasons why current stock market investors anticipate the United States Federal Reserve (Fed) will cut interest rates in May 2024 as inflation progressively approaches or falls below 3%, close to the Fed's long-term objective of 2%. If there are no large shocks or occurrences like those saw in 2022-2023, the prospects will be more visible, albeit they will vary by industry.

The market also considers China's economic predicament, which has been severely impacted by the Covid-19 outbreak and is now recovering slowly. Major nations across the world are attempting to minimize their reliance on China, which is contributing to a major fall in China's industrial production, as well as concerns relating to information technology and real estate.

"In fact, the story of China's economic power has been unfolding since 2018, when the United States launched its trade war with the country." China, on the other hand, continues to be the world's greatest producer in several industries and controls many of the world's rare raw resources. Despite economic downturn in 2023, we believe they will still have numerous variables to preserve their world-leading status. "Large global corporations cannot afford to ignore a market with over 1.5 billion people like China," Minh said.

Despite China's dwindling consumer spending power, the recession does not affect non-essential commodities such as automobiles and gadgets. Electric car usage in China hit a record high in 2022-2023, demonstrating that people's spending keeps pace with or even exceeds the worldwide level. According to Minh's study, China remains a prominent worldwide competitor in technology, particularly in the global electric car race.

Recently, numerous investment firms predicted that China's inflation will continue to fall, namely in food costs. Food supply was short during the African swine fever pandemic in the past, but this will not be the case in 2023-2024.

Positive Impact on Vietnam

The present economic recovery in the United States is a big boost for nations, including Vietnam, because the United States is Vietnam's largest export partner. Import-export operations and the FDI group continue to be important for Vietnam's economic growth. In October, practically all of our top export commodities showed excellent increase, including vegetables, grains, spare parts, electronics, and machinery.

According to HSC specialists, Vietnam's import-export activity will peak in March and April 2023, followed by a strong rebound. Import turnover surged as well, indicating that enterprises began acquiring raw materials in preparation for 2024. This is one of the encouraging signals for import-export trade. As we start a new economic cycle and the economies of the United States and Europe stay steady, combined with China's recovery, commerce in Vietnam will benefit significantly in 2024-2025.

It is worth noting that Vietnam's CPI in October has visibly slowed. Similarly to China, with steady supply and pork prices, a big contributor to CPI pressure, there will be no price surprises this year.

According to HSC's estimate, the CPI index in October decreased to 3.59% compared to the same period last year. The overall CPI decreased because rice prices peaked and increased slowly; education costs increased but also at a slower pace with no sudden spikes, and fuel costs decreased by 4.59% compared to September.

"If global oil prices remain around $80 per barrel, we will not experience any fuel price increases from now until June 2024." This will be a huge help to industrial companies. Although power production prices rose by 4.5% last week, reducing industrial output, the greatest impact on core operations is only 3%, making it a minor shock. "We have input fuel costs, particularly the cooling of gasoline prices, which is a significant support for the industrial manufacturing sector in Vietnam in the coming time," Bui Hoang Minh noted.

Stock Market Recovery

The Vietnamese stock market has undergone a broad recovery trend with the rest of the globe, amid lessening pressures linked to currency rates and interest rates, and the State Bank of Vietnam is no longer a net withdrawal.

According to Dr. Vu Dinh Anh, an economist, assuming no major interruptions, particularly in the fourth quarter, we will continue the trend of recovery from the previous quarter, and the situation will be more positive.

As a result, the stock market will continue to see good improvements in tandem with the economy's growth tendency. Meanwhile, increased focus is actively supporting the attractiveness of the Vietnamese stock market and the Vietnamese economy in general.

"However, investors must retain their equilibrium. Although there were no severely unfavorable causes, the market witnessed multiple deep dives in September and October, and liquidity was extremely low. Aside from stock group issues, investors should pay more attention to macroeconomic considerations, including both foreign and domestic macroeconomics. "It must be stated that the openness of the Vietnamese economy and the ability of foreign investors to lead and dominate the market are also very important factors," said Dr. Vu Dinh Anh.