Stock market expects growth in 2024 with lower interest rates, improved business performance

Three traders at the trading floor of DSC Securities Co in Hà Nội. After a period of decline and stabilisation in 2022-2023, Việt Nam's stock market is expected to witness significant growth opportunities in 2024. VNA/VNS Photo

HÀ NỘI Việt Nam's stock market is poised for growth in 2024, supported by lower interest rates and improved business performance.

After a period of decline and stabilisation in 2022-2023, Việt Nam's stock market is expected to witness significant growth opportunities in 2024. Lower interest rates and improved business results of listed enterprises are among the key factors driving this positive outlook, said experts.

Đinh Quang Hinh, Head of the Macro and Market Strategy Department of VNDirect, highlights several supporting factors, including the expected decrease in interest rates by the US Federal Reserve and the resulting inflow of investment capital into emerging and frontier markets like Việt Nam.

Domestically, the production and export sectors are showing signs of recovery, with increasing orders. Expansionary fiscal policies and wage reforms are expected to boost domestic consumption, contributing to improved business performance and driving stock market growth, he said.

Trần Đức Anh, Director of Macro and Market Strategy at KB Vietnam Securities Company, emphasises that the motivation for the stock market in 2024 will be driven by lower interest rates and the anticipated growth of listed enterprises, projected at 15-20 per cent. Market valuation factors are also expected to have a positive impact, with the current market P/E ratio at a neutral level, serving as a basis for assessing market improvements.

Experts from FinPeace Group Joint Stock Company foresee growth opportunities in the stock market, particularly towards the end of 2024. They anticipate two distinct positive periods: from mid to late April 2024, after the first quarter business results reporting season, and the end of the year when investor confidence in the market is expected to increase. Key stocks with undervalued potential will play a crucial role in driving the VN-Index rebound. Overcoming the important resistance level in the 1,200-1,250 range will be crucial for the market's long-term uptrend. It is anticipated that the breakthrough of this resistance area may occur in mid or late 2024.

Recognising the significant challenges faced by Việt Nam's stock market, both domestically and internationally, Deputy Minister of Finance Nguyễn Đức Chi emphasised the need for proactive measures during a recent conference held by the State Securities Commission. He urged the Commission to review and update regulations in the Securities Law as part of the legal development programme. Additionally, he called for the revision and amendment of decrees, guiding circulars, and relevant legal regulations to adapt to market conditions.

Monitoring activities were highlighted as a crucial aspect, with the aim of detecting and strictly handling violations in order to promote transparency and a healthy market environment. The Deputy Minister also underlined the importance of proactive coordination with relevant stakeholders to expedite market upgrades.

These measures aim to ensure a more sustainable development of Việt Nam's stock market, enhancing its transparency, efficiency, and overall health. The State Securities Commission and other relevant parties are working together to address these challenges and pave the way for a stronger and more resilient stock market in the future.

Signs of recovery 

According to the State Securities Commission, Việt Nam's stock market encountered difficulties and challenges from both domestic and foreign sources in 2023. The first half of the year saw a quiet trading market with significantly decreased liquidity compared to the previous year. This was attributed to the slowdown in major economies, inflation, and tight monetary policies implemented in many countries.

However, the market experienced a strong breakthrough in the third quarter, with the VN-Index reaching its highest level of 1,245.44 points on September 12, marking a 24 per cent increase compared to the end of 2022. Liquidity in the market also improved significantly during this period, with the average transaction value per session reaching VNĐ24.6 trillion, an 80 per cent increase compared to the average in the first half of the year.

Despite the positive momentum, the market underwent a strong correction and returned to around 1,100 points. As of November 30, 2023, the VN-Index recorded an 8.6 per cent increase compared to the end of 2022. Market capitalisation reached VNĐ5.75 quadrillion, a 10.1 per cent increase, equivalent to 60.5 per cent of GDP.

Đinh Quang Hinh, Head of the Macro and Market Strategy Department of VNDirect, noted that the market experienced a significant adjustment period in September and October, erasing much of the earlier gains. The market faced challenges as market support faded, and factors such as the sharp increase in US government bond yields and the rise of the US Dollar put pressure on the exchange rate. The State Bank issued bills to support the exchange rate in response.

The market saw a decrease in profit growth that fell below expectations, leading to some investor disappointment. The valuation ground also became less attractive, making it difficult to attract new cash flows. Continuous net selling by foreign investors further impacted the market. In November, the market recovered but only managed to regain half of the earlier gains. However, VNDirect experts believe that Việt Nam's stock market is still on a recovery trend, setting the stage for more positive growth in the coming years.