Vietnam Stock Market: Opportunity and Confidence

Although stock experts share the common remark that the correction of the Vietnamese stock market is paving the way to enter into orbit of sustainable development, the slump is portraying the picture of economic hardships. However, this does not create the investor confidence. And, hundreds of investors are leaving the market everyday because many listed companies are suffering losses and facing bankruptcy.

 

The prolonged decline has caused even the most patient investors to abandon their hopes on the market in the short term. The question when the market really recovers or enters the upward trend remains open and unanswered. Shares continue to drop the value.

 

According to analysts, the Vietnamese stock market shows no signs of growth but the current performance is a good foundation for future market development. According to technical analysts, when the trading volume improves, the market will have strong catalysts for robust growth. The increase in daily trading volume and trade orders evidences the return of cash flows into the market. This is considered a particularly important signal in the current period which is believed the bottoming phase.

 

The stock market is in the period of divergence, driven by improved trading volume. Empirically, the surge in volume in a lacklustre market is the first step for a long and sustainable growth trend of the Vietnamese stock market. When the trading volume soars, prices will shoot up.

 

In February 2009, after nearly 2 years of decline, the VN-Index kept going sideways although trading volume and value surged. And, after a short time, the market started a new upward spiral with a more than double growth. In January 2013, the market volume also augmented before a robust uptrend started. However, as fundamentals are not enough, the uptrend lost steam and slid into the falling stage.

 

Currently, the purchase or sale of foreign investors has major impacts on the market trend. As soon as foreign investors offload shares, the market plunges markedly.

The purchase of foreign investors also has significant effects on the market. The market gains ground given the return of cash flows. In early 2013, they increased holdings, the market advanced strongly and steadily.

 

Mr Michael Kokalari, Head of Research Department at Maybank Kim Eng Securities Company, said foreign investors have strong interests in the Vietnamese stock market. He pointed out that given the current accumulation of the market, the VN-Index is likely to jump high towards the end of this year.

 

The market development in September 2013 shows that although the market has not recovered, it is having more winning sessions and foreign investors are increasing holdings. Besides, the ongoing market restructuring and better risk control also provide positive signs.

 

The VN-Index advanced 14.25 percent in the year to August while the HNX-Index also scored 7.18 percent. More companies announced initial public offering (IPO). In the first six months of 2013, as many as 393 companies offered shares to the public, compared with just 178 companies in 2012. As seen, more companies decided to attract capital from the stock market. This may come from their capital difficulty due to hard access to short-term bank loans.

 

Although the number of companies seeking new cash flows from public offerings, proceeds are opposite. They raised just VND2,344 billion in the reporting period, down 58 percent from the same period of 2012 but share auctions mobilised VND420 billion, up 75 percent year on year.

 

Although the downward trend has persisted and a considerable number of investors have left the market, these realities seem not to have major effects on foreign investors. More foreign investors registered to trade in Vietnam. The Vietnam Securities Depository reported to grant securities transaction codes to 166,507 foreign individual and institutional investors as of August 30, 2013. This proves their important contribution to growth and liquidity of the market in the past time. Particularly, they bought net VND3,194.27 billion in the eight-month period.

Thus, although the market still faces a lot of difficulties and the possibility of short-term rally is low, the attraction of the market has not lost. Especially for foreign investors, the stock market still has a lot of opportunities.