After the strongest week in nearly 13 years, what will happen to Vietnam’s stock market?
After just one week of strong gains, the entire market capitalization has regained more than $19 billion. From the 2-year bottom confirmed in mid-November, this figure has even reached 30 billion USD.
The stock market has just experienced a prosperous trading week when stocks of many industry groups such as real estate, securities, steel, banking,… continuously race in green and purple. VN-Index increased strongly in 4/5 sessions, thereby ending the week with an increase of 11.17% to over 1,080 points. This is the strongest increase in a week the index has recorded in the past 13 years.
The last week the market had a stronger week than the past 5 sessions occurred from December 21-26, 2009. At that time, VN-Index fluctuated between 450-500 points and the one-session margin on HoSE was only +/-5%. The market size is also very small with a HoSE capitalization of approximately half a million billion dong, only about 1/10 of the current one.
After only one week of strong increase, the market capitalization has regained more than 450,000 billion dong (~19 billion USD). From the 2-year bottom confirmed in mid-November, this number has even risen to more than VND715,000 billion (~$30 billion). However, compared to the peak in early April, the total market capitalization of Vietnamese stocks has “evaporated” nearly 2 million billion VND (~83 billion USD), to 4.6 million billion VND.
Investor sentiment has been somewhat more stable after the turbulent period. Market liquidity also improved significantly. The average matching volume on HoSE exceeded 1 billion shares/session, up 72% compared to the previous trading week. The average trading value of the whole market also skyrocketed to VND 20,400 billion/session.
Despite the recent strong recovery, the P/E trailing of the VN-Index is still only at 11.3x – only slightly higher than the bottom of the past crisis periods and much lower than the average level 10 years. A lot of Bluechips are trading around book value, even some names have P/B less than 1 time.
The attractive valuation has contributed significantly to attracting the return of foreign investors. In the past week, foreign investors have net bought 5/5 sessions across the market with a total value of 9,358 billion dong, of which nearly 9,200 billion dong are through order matching channel. Previously, foreign investors set an unprecedented record when they bought approximately 16,000 billion dong through the matching channel in November.
In addition to the disbursement of large active funds such as Dragon Capital, VinaCapital, etc., foreign capital flows are still pouring into the market through the ETF channel. In November, ETFs net withdrawn more than 8,000 billion dong, the highest in recent years, thereby bringing the total accumulated value from the beginning of the year to a record of more than 17,000 billion dong.
Many positive signals appear
Foreign investors’ net buying is likely to continue in the coming time when Fubon ETF is still mobilizing more trillions of dong and is ready to buy and collect Vietnamese shares. Regarding this trend, Mr. Hoang Anh Tuan, Senior Investment Advisor of MBS Securities, said that foreign investors will continue to disburse into the Vietnamese stock market and the VN-Index will be in the trend increase, towards the target of 1,120 points by the end of this year.
Besides the net buying of foreign investors, Vietnam’s macro factors are also considered to be still positive. After the story of inflation and growth has been stabilized, there will be a signal to open room in early 2023 to clear capital flows, which is the basis for Vietnam’s stock market. These expectations could create a positive sentiment for the market at the end of 2022.
In the same opinion, VNDirect believes that in the first months of 2023, the market will follow the bullish scenario, largely because asset valuations are already too attractive, but the upward momentum will be quite fragile and unstable in the context low liquidity, interest rate pressure, exchange rate and solvency test for mature corporate bonds are still there.
However, VNDirect thinks the market will rally well from mid-2023 and expects the rally to be solid as central banks become “less hawkish” triggering a new round of asset revaluations. Stock markets, especially emerging areas, will reflect the story of interest rate reduction from 4-6 months ago.
In addition, the signal of a peak in both global inflation and US interest rates will stimulate the risk appetite of foreign investors looking for high growth stories from emerging markets. The recent loss of technology stocks has led to a shift in investment to traditional business activities, which is also the nature of Vietnam’s stock market, where banking, real estate, electricity, and consumption dominate in terms of capitalization.
In addition, the stock market will be supported by the fact that net profit growth of the whole market will be better in the second half of 2023 thanks to lower interest rates, stronger VND, lower input material prices and the opening of China’s back door will create more impetus. With a forecast of 14% increase in listed company profits and a P/E valuation of 12-12.5x, VNDirect forecasts that the VN-Index will return to 1,300-1,350 points in the second half of 2023.