Three Scenarios for Stock Market in 2013

He presented three macroeconomic scenarios of Vietnam in 2013 with different impacts on the stock market.

 

First scenario: Expectations for profitable investments are the clearest on the assumption that the Government will issue policies to reduce prices of properties like securities and real estate, and securitize real estate and bad loans to sell to investors.

 

He pointed out that when cash flows are cleared and bad debts tend to decrease, the economy will recover faster than now. Thi is the opportunity for a steady recovery of the stock market. Many investors will earn a lot as they have purchased when prices remain low.

 

However, according to Mr Thang, in this scenario, given current context, Vietnam will unlikely adopt stimulus policies. If money continues to be pumped into the economy via stimulus packages, high inflation will return. With the effort to set up the national debt trading company (VAMC) to address bad bank loans, in case the Government applies securitisation of assets while impacting the market to reduce asset prices, it will create the opportunity to attract unemployed capital from the public. As a result, cash flow circulates and gives no rise to inflation. Then, bad debts and inventories will be settled. In this scenario, when the economy has dealt with bottlenecks and recovers, prices of assets must reduce to expected levels of investors. According to this scenario, the stock market may decline and real estate will slump 20-30 per cent but this will be the foundation for sustainable growth next years.

 

Second scenario: The VAMC establishment process is quickened together with the accelerating process of restructuring financial system to boost the overall development of the economy. Thus, VN-Index will rise a lot in the year and the stock market will be a good long-term investment channel. Mr Thang said, however, this scenario is less likely to occur in practice.

 

Third scenario: Economic support policies of the Government are not strong enough and ineffective, thus causing a little influence on enterprises. The structuring of economy and market does not produce expected results. The market will gain slightly in the long term and investors only can tread water to take margin. In this scenario, the market is likely to decline in the medium terms.

 

Dr Thang said that the strong rally of the market the past two months, with many shares soaring to the highs of multiple months or years, makes current speculative investments ineffective. Many factors indicate signal potential decline. However, investment opportunities in 2013 will appear clearer when VN-Index slides to 400 points and HNX-Index skids to 54 points. Big rallies may be seen in the third quarter or four quarter as the market may have slumped much before that. Besides, the market may be further boosted at the end of the year when the government reveals policies to spur economic development.

 

The scenarios revealed by FLCS depict recent forecasts by leading specialists. They expect macroeconomic regulatory policies will be translated into economic performances and have good impact on asset markets. Sharing this view, Dr Le Xuan Nghia, Member of the National Advisory Council for Financial and Monetary Policies, said that the liquidity of asset markets will increase in the third quarter and fourth quarters.

 

Dr Tran Du Lich, Member of Member of the National Advisory Council for Financial and Monetary Policies, added it is unable to predict an improvement or recovery of the macroeconomic picture in 2013 but it has many positive signals. “In the negative picture appear more positive spots. However, challenges will exist with opportunities at both macro and micro levels. And, this opens up the opportunity for enterprises to perform restructuring and attain sustainable development. The market will become healthier,” he said.