Financial markets aim for stable second-half expansion
Vietnam's Stock Market Rally: A Cautious Optimism for the Rest of 2023
The Vietnamese stock market has experienced a significant recovery in the first half of 2023, with the VN-Index surging by 28% since its low point in April. Over 40 listed companies in SSI's coverage universe posted an average profit growth of 12.2% year-on-year and 19.9% quarter-on-quarter in Q2 2023.
Foreign investors have returned to the Vietnamese market after two consecutive years of net capital outflows. In fact, over just five trading sessions, foreign investors recorded net purchases exceeding $275 million. This resurgence in foreign capital inflows is largely attributed to proactive government measures supporting export activity, domestic production, public investment, and consumption.
The recent rally in the VN-Index has been driven by several key factors. The market upgrade narrative, solid GDP growth data, and favorable developments in tariff negotiations have all played a significant role. According to Dinh Minh Tri, director of Individual Client Analysis at Mirae Asset Securities, these factors have contributed to the recent rally and are expected to drive long-term growth.
Structural and regulatory reforms have also played a crucial role in the market's recovery. Vietnam's government has implemented significant reforms to modernize the market, improve transparency, and align it with international standards. Highlights include the introduction of the new KRX trading platform enabling same-day (T+0) settlements, regulations on margin trading, enhanced disclosure rules, and plans to establish a central counterparty clearing (CCP) system by 2027. These reforms reduce settlement risks and attract institutional investors.
Economic growth and supportive government policies have also contributed to the market's recovery. Vietnam’s economy grew at about 8% GDP growth, supported by policies such as boosting public investment, VAT reduction, easing credit conditions, accelerating real estate licensing, and legal reforms. Large infrastructure projects underpin this expansion, strengthening market fundamentals and investor sentiment.
Global macro support has also been a driving force behind the recent rally. Expectations of US Federal Reserve interest rate cuts within 6-12 months are viewed as positive for Vietnamese bond markets and the local currency (VND), potentially making Vietnam more attractive to foreign investors.
However, analysts warn of potential market volatility between July and early August due to the earnings reporting season and profit-taking pressures. SSI also maintains a positive outlook for the rest of 2023, with a target of 1,500 points for the VN-Index by end-2025. Early signs of pressure from US trade measures may become more evident in the third quarter, particularly in export-oriented industries such as textiles, seafood, and industrial real estate.
Despite these potential challenges, the combination of improved market infrastructure, regulatory alignment, economic expansion, and investor confidence from both domestic and foreign sources form the backbone of this outlook. Vietnam has more than a 50% chance of achieving a market upgrade, either in September 2025 or March 2026, which tends to increase foreign investment inflows and broader international recognition.
Investors are advised to focus more on domestic fundamentals such as credit growth, public investment, consumer demand stimulus, and tax relief measures. Sector-specific dynamics also suggest selective opportunities within the market, with stocks in securities companies and aviation showing strong performance, while banking sector growth has been more moderate.
In conclusion, the Vietnamese stock market's recovery and expected long-term growth are underpinned by a combination of structural and regulatory reforms, economic growth, foreign capital inflows, global macro support, and market fundamentals. Analysts project the VN-Index potentially reaching 1,800 points by the end of 2025, provided there are no major disruptions.
- The recent rally in Vietnam's stock market, as indicated by the VN-Index, is fueled by a combination of factors such as market upgrade narrative, solid GDP growth data, favorable developments in tariff negotiations, and structural and regulatory reforms.
- Foreign investors have returned to the Vietnamese market, injecting over $275 million within five trading sessions, due to proactive government measures, modernized market infrastructure, and improved transparency, creating an optimistic outlook for business investment and long-term growth.
