Vietnam Stock Market Outperforms ASEAN Peers in H1, 2023

The Vietnamese stock market’s optimistic performance in the first half (H1) of 2023 eased certain difficulties faced by the economy. Strong domestic cash flows helped the VN-Index outshine other Southeast Asian peers.

The Vietnamese stock market’s positive recovery is attributed to the loosening of monetary and fiscal policies

Renewed domestic cash flows in H2, 2023

Vietnam’s stock market entered 2023 amid great worries about corporate bond maturity and global economic recession. The 6-month GDP data also reflected concerns from the start of the year, with the gross domestic product (GDP) expanding by 3.72%, just higher than the growth of 1.74% seen in the first months of 2020.

In H1 2023, Vietnam rose over 10%, alongside its Asian peers like Japan (+27.19%), TWSE (+19.65%) and KOSPI (+14.66%). In ASEAN, the VN-Index outperformed the rest when it remarkably climbed 11.53%. Meanwhile, the HNX-Index added 10.72% and UPCoM-Index advanced 20.03%.

On all three exchanges, XDC was the best performer with a 73-times gain. However, on HOSE and HNX, ST8 (+235,95%), VC7 (+173.13%), DTD (+172.48%) and CET (+168.75%) were among the best performers.

According to HOSE, long-term bullish stocks accounted for nearly 74% of listings, meaning that three out of every four stocks traded have moved above the MA200 line. This is the good status of HOSE in the past 15 months.

Cash flows have positively returned to the market, evidenced by the daily trading value of VND17 trillion in June, nearly 60% higher than at the start of the year. Given only order-matching value counted, the value was nearly 70% higher, reaching VND15.17 trillion a day

Since March 2023, when the State Bank of Vietnam (SBV) started cutting policy rates, liquidity has continuously increased month by month. Currently, domestic investors are the main force behind the impressive recovery because foreign investors have been net sellers for three months in the second quarter of 2023. Their net selling value on HOSE totaled over VND6 trillion in April, May and June.

According to data from the Vietnam Securities Depository (VSD), domestic investors opened 104,745 new securities accounts in May, nearly five times more than the previous month and the highest in nine months since August 2022.

Despite many support policies, the market is yet to completely revive

As mentioned above, domestic cash flows are driving the market, not foreign inflows as in the last months of last year.

The turning point for renewed domestic cash flows into the market is that the State Bank of Vietnam (SBV) repeatedly lowered policy interest rates. Although the Fed and other major central banks in the world continued their tight monetary policies, the SBV has made four policy rate cuts to support the economy since March.

Liquidity worries about bond maturities also eased as shown by the fact that the SBV did not need to intervene in the OMO market in recent weeks. Liquidity improved markedly from Q4 2022, helping interbank interest rates cool down to below 0.5% in the last days of Q2 2023.

However, to support the market recovery, lowering interest rates is not the only step that has been taken by the Government and the central bank in recent times. Decree 08 helps businesses extend the bond repayment period. Decree 10 amends and supplements some enforcement contents of the Land Law; Decree 12 extends the deadline of tax and land rent payment in 2023; Decree 44 reduces VAT to 8%; and Decision 500 of the Prime Minister approves the latest Power Plan 8.

Meanwhile, the SBV has also issued many circulars on restructuring debt repayment terms, keeping debt groups unchanged, and allowing credit institutions to buy back corporate bonds.

Moreover, there is an effort to disburse public investment as planned with a record value so far. As of May 31, over VND157,095 billion was allocated, reaching 22.22% of the plan assigned by the Prime Minister. In the coming time, the focus of public investment will be Package No. 5.10, worth more than VND35,000 billion, which is involved in passenger terminal construction at Long Thanh International Airport in Dong Nai province. Therefore, Vietnam stock market’s positive recovery is due to a series of measures aimed at loosening monetary policies and supporting fiscal policies.

However, “easy” cash flows are unlikely to be repeated as seen in 2021-2022. In late June 2023, police prosecuted a criminal case of stock market manipulation concerning Asia-Pacific Securities Joint Stock Company (APS), Asia Pacific Investment Joint Stock Company (API), and IDJ Vietnam Investment Joint Stock Company (IDJ).

Moreover, the domestic economy is still facing challenges such as weakly recovered global demand, inflation risks, and continued interest rate hikes by major central banks. In particular, the bottleneck in the real estate market and corporate bonds has not been resolved, so investor caution is unlikely to be alleviated.

Source: Vietnam Business Forum