'Negative factors for stocks may have passed'

Analysts believe that negative news affecting the stock market has passed or is diminishing, and the market has prospects for recovery.

In a recent analysis report by VinaCapital, the team of experts stated that from mid-September to the end of October, Vietnamese stocks recorded a 16% decline and experienced a sell-off due to a combination of domestic and international factors. These factors included concerns about rising interest rates as the USD exchange rate increased, volatility in Vingroup and Vinhomes shares related to convertible bonds, forced selling orders from several securities companies, rumors about controls on some unofficial margin lending sources, and lower-than-expected corporate profits in the third quarter.

According to VinaCapital, the biggest factor weighing on the market is the depreciation of the Vietnamese dong, raising concerns that the State Bank of Vietnam will tighten monetary policy to respond to the devaluation, while also prompting foreign investors to sell off their holdings.

However, the actual developments did not match investors' predictions. The USD exchange rate has remained stable for several weeks without the need for the State Bank to raise interest rates. Simultaneously, the upward trend of the USD seems to have ended, especially after the ISM/PMI indices were low last week, further reinforcing VinaCapital's belief that the central bank will keep interest rates unchanged in the coming months.

This analysis group expects the USD/VND exchange rate to depreciate by 3% by the end of this year, supported by the growth of Vietnam's trade surplus, from 3% of GDP in 2023 to 7% in 2024. This expectation is further reinforced by the VND's appreciation of approximately 1% in the past few days, bringing the year-to-date depreciation back to 3%.

"All the most negative factors at this time have either eased or are easing, and the outlook for a recovery in Vietnamese stocks in the coming months is supported by earnings growth and a recovering economy , combined with the market's cheap valuations," the VinaCapital report stated.

Regarding monetary policy, VNDirect shares the view that the State Bank of Vietnam is unlikely to raise interest rates. Deposit interest rates are currently at their lowest level compared to the period from 2021 to the first half of 2022 due to excess system liquidity amidst weak credit demand. The company expects 12-month deposit interest rates to remain at an average of 5.4% per year for the remainder of 2023. Accordingly, lending interest rates will maintain a downward trend until the end of this year thanks to the rapid decrease in funding costs for commercial banks recently.

In addition, the State Bank of Vietnam has also stopped issuing treasury bills after more than a month of doing so. As of November 9th, VNDirect reported that nearly 185,700 billion VND had returned to the system through maturing treasury bills.

The market has shown signs of improvement. At the end of this week, the VN-Index gained nearly 25 points compared to the end of last week, with liquidity increasing above average. The HoSE index has recovered for the second consecutive week, currently surpassing the 1,100-point support level. According to Saigon - Hanoi Securities (SHS), this development helps rule out the possibility of the market returning to a downtrend.

However, the VN-Index is still in its initial recovery phase and is moving loosely. The index will need more time to find a balance point for consolidation. SHS expects a consolidation base to form above 1,100 points when the final trading session of the week tends to retest this support level. The analysis team predicts that the test is likely to be successful.

SHS notes that, although economic activity may be vibrant in the last quarter of the year and GDP is trending towards recovery, macroeconomic factors still pose risks. The global geopolitical situation remains unstable, global economic growth is low, and global inflation is not yet fully controlled due to the continued rise in energy and food prices; the EU economy is also at risk of recession.

Mirae Asset Securities also believes there are three major risks stemming from the global situation. Firstly, global interest rates remain high for an extended period, impacting debt restructuring, business operations, and purchasing power. Secondly, there is the potential impact of the real estate crisis in China. Thirdly, there is the scenario of a stronger-than-expected US dollar and net selling pressure from foreign investors. In fact, foreign investors maintained their net selling strategy with 2,720 billion VND in October. Cumulatively since the beginning of the year, foreign investors have sold approximately 10,500 billion VND amidst the appreciating US dollar and rising US bond yields.

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