Vietnam Stock Market in 2024 Poised to Ride Crest of Wave

The stock market in Vietnam is projected to experience an upward trajectory in 2024, propelled by a confluence of supportive factors such as a strengthening macroeconomic backdrop, low lending interest rates, and an anticipated market status upgrade in 2025.

If Vietnam’s economy experiences robust growth leading to a 19.6% increase in Earnings Per Share (EPS), it could propel the VN-Index to reach the 1,500-point mark

In the tumultuous year of 2023, Vietnam’s stock market registered a growth of 12.2%. Despite the volatility, the VN-Index concluded the year at 1,129.9 points, marking a 23.9% rebound from the mid-term low in mid-November 2022. However, it remained 26.1% below the peak achieved in April 2022. Notwithstanding this, the growth of the VN-Index was commendable when compared to other regional markets such as Thailand, Indonesia and China.

Currently, the market is buoyed by promising macroeconomic prospects. Globally, market consensus suggests that the U.S. Federal Reserve (Fed) is unlikely to hike interest rates further until it commences the reduction of policy rates, anticipated to begin toward the end of the first quarter of 2024. The European Central Bank (ECB) may initiate the reduction of policy rates from June 2024. Furthermore, U.S. stocks, no longer considered cheap following a period of robust growth, could catalyze the return of foreign capital to emerging markets like Vietnam in the latter half of the first quarter or early second quarter of 2024.

In Vietnam, the GDP grew by 5.05% in 2023, one of the highest rates of growth in the region and globally. The GDP growth accelerated quarter-on-quarter, and exports regained their momentum. Interest rates continued their descent to a 10-year record low amidst tightly controlled inflation. The low deposit and lending rates are expected to channel capital flows into the stock market.

According to financial institutions, savings deposits at banks reached an all-time high of more than VND13,500 trillion at the end of 2023, reflecting a year-on-year increase of 14%. Typically, such “cheap money” readily flows into investment channels like real estate and stocks. The market also saw the resurgence of substantial cash flows as securities companies, domestic organizations, and individuals were net buyers of VND3.8 trillion in December 2023.

Many listed companies reported highly encouraging business results for the fourth quarter. Commercial banks such as VCB, BID, CTG, STB and VIB recorded an 18% quarter-on-quarter growth, attributable to robust credit growth and diminished provisioning pressure. In 2023, the after-tax profit of these five banks surged by 13%, exceeding expectations.

The stock market is set to become increasingly appealing, given the anticipated upgrade in 2025 and the State Securities Commission’s plan to introduce derivative products based on the VN100 Index.

A consensus has emerged among financial and securities experts regarding the positive outlook of the stock market in 2024. An analyst from Mirae Asset Securities Company proposed several scenarios for the stock market in 2024, with a particular emphasis on two primary scenarios: If the economy witnesses a strong recovery and the Earnings Per Share (EPS) for 2024 grows by 13%, the VN-Index could trade in the 1,400-point range. If the economy experiences very strong growth and the EPS increases by 19.6%, the VN-Index could reach 1,500 points.

From a technical standpoint, Shinhan Vietnam Securities Company assigned a 70% probability that the VN-Index will move to the 1,350-1,450 point range. The driving force behind this is the anticipated economic recovery and the satisfactory performance of listed companies.

Mr. Le Anh Tuan, Director of the Securities Division at Dragon Capital, said that domestic cash flows disbursed into securities are derived from savings, not leveraged or borrowed to support prices. Consequently, in 2024, the growth could reach 15-30%, spurred by economic recovery and record-low interest rates. He expressed optimism that 2024 will be a favorable year for stock investing and expressed hope that the State Bank of Vietnam will implement another interest rate cut in 2024. Under the growth scenario, he predicted that the real estate and banking sectors will experience a strong recovery. Conversely, sectors such as consumer staples, healthcare, energy, and utilities, including electricity and water, are likely to underperform in this cycle.

Mr. Andy Ho, CIO of VinaCapital, asserted that the present moment is an opportune time to invest in Vietnam. Investors might be interested in sectors such as consumer, healthcare, and real estate.

As we enter 2024, numerous positive factors have gradually emerged. Inflation is under control, and the cycle of rate hikes by central banks is nearing its end. Vietnam’s economic outlook is brighter, with its GDP growth forecasted to reach as high as 6-6.5% in 2024, providing a solid foundation to support stock recovery.

By Huong Ly, Vietnam Business Forum