Which factors will drive the stock market in 2020?

The stock market in 2019 closed with a VN Index increase of 7 percent, an average achievement, though the macroeconomic indicators were very good and the State Bank loosened monetary policy.
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The stock market in 2019 closed with a VN Index increase of 7 percent, an average achievement, though the macroeconomic indicators were very good and the State Bank loosened monetary policy.

After selling more than buying occurred in Q3 and Q4 2019, foreign investors are expected to return to the market with net purchases in 2020.

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According to Rong Viet Securities, major ETFs are likely to continue attracting money from Thailand and South Korea, where the interest rates are at low levels following the central banks’ campaigns of slashing prime interest rates. The cash flow from the two countries may head for Vietnam, where investors can see bigger opportunities.

Vietnam’s VN Index increased by 7 percent in 2019, higher than the increases of South Korean Kospi of 6.3 percent and Thai SET of 0.6 percent.

Meanwhile, Vietnam’s stocks are expected to see their proportion increasing in MSCI Frontier 100 from 12 percent to 30 percent, when Kuwait officially shifts to the group of MSCI emerging market, slated for May 2020.

The investors will also be encouraged by the state’s divestment and equitization, which are believed to become bustling again in 2020. The process went very slowly in the last few years and the government decided that Vietnam would have to ‘sprint’ in 2020.

A high number of large corporations is expected to list shares or undergo the state’s divestment in 2020, including VEA, PLX, Agribank, HVN, Vinacomin, MobiFone, VNPT and Vietnam Cement Corporation. The valuable shares would help lure more money from foreign investors.

2020 is also the deadline for commercial banks to list shares. This means that a lot of banks will have to enter the bourse this year. Once the goods become more plentiful, foreign investors will have more choices for investment.

To date, only 50 percent of banks have listed shares on the bourse, which means that 17 other banks will have to list shares this year.

Economists all agree that Vietnam may witness another prosperous year in 2020 with good macroeconomic indicators, following the year 2019 with the high 7.02 percent GDP growth rate. The recalculation of GDP will pave the way for the government to seek more capital for large infrastructure projects.

Meanwhile, Vietnam has every reason to believe that the FDI will continue to flow to Vietnam, the dong/dollar exchange rate will be stabilized and the interest rates will decrease following a series of drastic measures taken by the watchdog agencies recently. This will help businesses save costs and operate more effectively.

Bloomberg has predicted that the net profit of 50 companies with the largest capitalization value would see higher growth rates in 2020 than 2019 (22 percent vs 16 percent).

Kim Chi