Vietnam’s stock market outlook for 2Q23

The VN-Index fluctuated in a narrow range around 1,020-1,060 points in 1Q23

The VN-Index fluctuated in a narrow range around 1,020-1,060 points in 1Q23, although it fluctuated around 1,080-1,100 points at times. However, as a result of some positive factors, the market may enter a slight uptrend in 2Q23.

Monetary policy reversal

When major banks such as Silicon Valley Bank and Signature Bank failed, global investors appeared to "sit on the fire." In addition, UBS acquired Credit Suisse, one of the world's largest banks. Never before has the global financial system been placed on high alert, causing investors' trust to be "shaken." This has also caused global stock markets to plummet, with many believing that the aforementioned collapses will have "domino" effects on banks worldwide.

However, investors may become overly concerned about events that they can avoid and limit  major damage if governments and major central banks intervene immediately if necessary to avoid major shocks.

The FED only raised interest rates by 0.25% at its most recent meeting in March, predicting that rates would peak in 2023 (including an expected rate hike at the next meeting in May). If the Fed's interest rate reaches a peak in 2Q23 and can be maintained until the end of the year, interest rate cuts could begin as early as 2024.

In this context, the SBV also adopted the second policy rate cut, prompting a more positive reaction from the stock market. The VN30 is frequently sensitive to macro movements and has had thrilling trades.

ETFs join “fray”

Except for the net sale in February, foreign investors were net buyers in both January and March, with 2,500 billion dong and 1,500 billion dong, respectively, according to data from the first three months of 2023. VNM ETFs and Fubon ETFs have also invested in Vietnamese stocks, particularly VN30 stocks. As a result, the VN30 is outperforming the VN-Index. This demonstrates that huge stocks are interested in overseas capital flow.

If the stock market trend has bottomed out and a monetary policy reversal is imminent, it is totally legitimate for ETFs to pick the time to invest in equities in the Vietnam stock market.

Foreign investors' net buying will also be a driving force in improving the liquidity of the Vietnamese stock market. Meanwhile, domestic cash flow will resume soon. The fact that local and foreign cash flows have entered the market will help the stock market rise, even though the likelihood of a significant increase is low.

Which stocks attract cash flow?

Even in the worst-case scenario, the Vietnamese stock market "holds steady" in the face of negative news. After falling from 1,520-1,525 points to 880-900 points throughout the most of 2022, VN-Index nearly only moved sideways in the first three months of 2023, hovering at 1,040 points (/- 20 points). Many large stocks have been identified at low levels, making further reduction difficult - the cumulative buying demand for stocks has caused VN30 and many large stocks outside VN30, small and mid caps in sectors such as banking, consumer goods, steel, construction and installation, chemicals, real estate... to reach historic lows or lows when the Vietnam stock market's P/E ratio was around 11x.

Stock market movements typically occur in five stages and follow a pattern of rising and declining wavelengths. The stock market will not continue to fall forever, and it will not continue to rise forever. The stock market's cumulative correction has also been 15-16 months since the beginning of 2022, and it is expected to undergo a recovery phase in the remainder of 2023.

Securities, banking, construction, oil and gas equities, and so on are anticipated to perform well when the stock market rebounds. Investors will also return to the stock market soon and increase disbursement once the cumulative adjustment is completed. VCI, LPB, FTS, KSB, PVS, VPB, LCG are some notable stocks.