Stocks are taking a hit from exchange rate fluctuations.

ANTD.VN - The strengthening US dollar has drawn capital out of the Vietnamese stock market, affecting the sentiment of domestic investors and leading to a series of sharp declines in the market recently.

After hitting a 14-month low of 100.4 points at the end of September, the DXY index (measuring the strength of the US dollar against major currencies) reversed course and regained its strength. The dollar's rebound, despite expectations of a Federal Reserve interest rate cut, was supported by a series of positive economic data from the world's largest economy.

In particular, the value of the dollar was further strengthened after the victory of Donald Trump, who pursued an "America First" trade policy.

Domestically, after cooling down significantly in August and September, the USD/VND exchange rate has also rebounded. The depreciation of the VND is not only affected by the strengthening USD, but also by internal factors, especially the seasonal increase in foreign currency demand from businesses at the end of the year.

In addition, international debt repayment obligations worth approximately $1 billion have also led to a recent surge in the State Treasury's demand for USD purchases.

To date, the Vietnamese Dong has depreciated by approximately 4.3% against the US Dollar since the beginning of the year, and is approaching its peak of 4.6% recorded in May.

Foreign investors intensified net selling on the Vietnamese stock market.

Under pressure from the exchange rate, foreign capital has intensified selling, despite the Vietnamese stock market moving closer to its upgrade goal. This is because, typically, when the US dollar strengthens, capital tends to withdraw from emerging markets.

According to statistics, as of November 19th, foreign investors had withdrawn a net amount of 92,000 billion VND, with 9,200 billion VND withdrawn in November alone, and approximately 4,000 billion VND sold in the last three trading sessions.

The continuous withdrawal of foreign capital not only puts selling pressure on the market but also affects the sentiment of domestic investors. Although the number of newly opened securities accounts has continuously increased over the months, domestic capital flows are becoming increasingly weak as cautious sentiment intensifies.

The VN-Index has been falling continuously, and yesterday (November 20th) it briefly dropped below 1,200 points before rebounding. Despite the recovery, most experts believe that the pressure on the Vietnamese stock market remains very high in the remaining months of the year.

Because the trend of net outflow of foreign investors is unlikely to reverse easily, even if exchange rate pressure is eased in the final months of the year.

Experts at MBS Securities Company believe that exchange rate pressure will gradually ease and reach VND 25,000/USD by the end of this year, under positive factors such as: a positive trade surplus of USD 23.3 billion in the first 10 months of 2024, FDI inflows of USD 19.6 billion, up 9% year-on-year, and a strong tourism recovery with a 41.3% year-on-year increase in the first 10 months of 2024.

The stability of the macroeconomic environment is likely to be maintained and further improved, forming the basis for exchange rate stability in 2024. In addition, pressure on the exchange rate is expected to gradually decrease in the near future as the Fed has begun its interest rate cutting cycle, having reduced rates by a total of 75 basis points since September, and is likely to continue cutting rates, albeit at a slower pace.

Similarly, KBSV Securities expects the USD/VND exchange rate to fall to around 25,000 VND/USD, up 3.5% from the beginning of the year.

Supporting factors such as the sharp rise in the DXY index fully reflected market expectations regarding the impact of Trump's re-election on the USD. No specific policy decisions will be made in the next two months until Trump officially takes office in early 2025.

The supply of foreign currency at the end of the year comes from the trade balance surplus, disbursed FDI, and year-end remittances.

Nevertheless, risks to the exchange rate remain as the Fed is uncertain about its interest rate cut trajectory. Fed Chairman Jerome Powell said that strong economic growth will give policymakers more time to determine how and at what pace to cut interest rates.

Mr. Nguyen The Minh, Director of Research and Analysis for Individual Clients at Yuanta Securities, leans towards the scenario where the DXY index approaches 107, and the exchange rate is also at its historical peak of 25,500 VND. The expert believes that if the USD correction does not exceed 107, the VN-Index will form a bottom.

On the positive side, US bond yields are stabilizing, the VN-Index has fallen to 1,200, and market valuations are attractive. It is expected that in the next few days, the State Bank of Vietnam will take actions such as selling USD to control the exchange rate.

Source: https://www.anninhthudo.vn/chung-khoan-ngam-don-ty-gia-post596101.antd