The stock market has shown positive long-term prospects recently. It maintained a positive state at the last trading session on August 31, just before the long National Day holiday starting September 2. Foreign investors’ net purchases came back as they put high hopes on some blue chips.
If including the whole week before the long holiday, the VN-Index increased by 3.4 percent, despite some worrying factors, including exchange rate fluctuation. The dollar selling prices quoted by commercial banks increased from below VND24,000 per share to VND24,300 at times.
The dollar price increase worried investors, while the market witnessed strong sales by foreign investors at many trading sessions. This phenomenon is commonly seen when the dollar price appreciates against the local currency.
Meanwhile, interest rates in the domestic market decreased rapidly, while the dollar profit in the international market kept moving up steadily following the US FED’s decisions to raise interest rates, with the total increase of 500 percentage points since March 2022.
The US FED is predicted to raise interest rates once more, possibly at the upcoming meeting in September, or the meeting in November. The new interest rates are believed to remain high for a period to fight inflation.
The greenback value increased also because the Chinese yuan became weaker in recent months, following unsatisfactory signs in the Chinese economy and the real estate market.
The strong dollar will put pressure on the Vietnamese market.
In August, foreign investors continued to sell more than purchase by VND3 trillion. This was the fifth consecutive month of net sales. Many enterprises have reported bad business performance as the consequences of the economic crisis lasting more than one year.
Reports showed that trillions of VND ‘disappeared’ right before the National Day holiday, while the profits of some large companies decreased after auditing, such as Novaland (NVL) and Hoa Binh Construction (HBC).
However, analysts say that investors’ confidence in the stock market is very strong. The mass increase of many shares just days before the long holiday is rarely seen. The liquidity was also at high level.
In general, the stock market was bustling in August with liquidity at the HCM City Stock Exchange (HOSE) up by 11 percent over the month before, to VND20.3 trillion per session.
While foreign investors rushed to sell shares, attributed to the exchange rate fluctuations, domestic investors bought shares in bulk, which supported the stock market. The VN-Index rose to above 1,200 points.
With the current valuations, shares are no longer cheap. The price to earnings (P/E) ratio has increased to levels seen in hot development periods, such as mid-2021.
However, this is the time when businesses recorded sharp drops in profits because of previous difficulties. Investors' expectations for positive results in late 2023 and 2024 are very high.
The number of newly opened securities accounts has increased rapidly recently. According to the Vietnam Securities Depository Center (VSD), 146,000 accounts opened last June.
Just days before the holiday, foreign investors reversed the trend, buying shares in bulk.
Experts say there are many factors attractive to investors, including low interest rates. The deposit interest rates were lowered to 4 percent on average for short-term and 6-7 percent for long-term deposits after the State Bank of Vietnam (SBV) slashed the operating interest rates four times in 2023, which meant a decrease of 150 basis points. Idle money among the public is expected to flow to the stock market.
According to VnDirect Securities, the business results of listed companies improved in the second quarter. The trend is expected to continue in the second half. The GDP in the second half is predicted to grow by 7.1 percent compared with the same period last year. If so, the GDP growth rate in 2023 will be 5.5 percent, creating an impetus for a stronger recovery in 2024.
With business results expected to become better in the second half, share prices are expected to increase.