Vietnam’s stock market remains attractive investment channel: Expert

Investment in stocks remains attractive amid signals of a recovery in the corporate sector and low-interest rates, according to Le Anh Tuan, Chief Investment Officer at Dragon Capital.

An investor at a securities company in Hanoi. Photo: Pham Hung/The Hanoi Times

The stock market has undergone a significant correction, with the VN-Index dropping to around 1,200 points, its lowest level in nearly two years. Analysts believe that recent geopolitical tensions and a rise in exchange rates have significantly affected investor sentiment, leading to a sharp decline in the index.

In a meeting with investors on April 16, Tuan said that to balance the exchange rate, domestic deposit interest rates could rise by 50-150 basis points over the next 3-6 months. However, this does not imply that monetary policy will be reversed.

"Monetary policy will remain accommodative, and interest rates will be kept low to support the stock market," Tuan stated.

Given favorable macroeconomic conditions, combined with the expected rate cut by the Federal Reserve (Fed), the Dragon Capital expert believed that the stock market would experience good growth. Typically, during an uptrend, the market can adjust by 5-10% during the correction phase.

Therefore, according to Dragon Capital’s expert, stock market investment returns remain highly attractive if investors know how to manage their capital allocation.

Generally, loose monetary policy is one of the key drivers supporting the stock market, macroeconomic prospects, and corporate profit growth. Dragon Capital believes the market currently receives clear signals of corporate recovery.

Vietnam's economy has also seen noticeable improvements, particularly in export growth. According to the General Statistics Office, exports in the first quarter surpassed $93 billion, up 17% compared to last year.

Other investment firms are also optimistic about the market this year. In a recent investor meeting, Vietcombank Fund Management Company (VCBF) stated that the VN-Index has substantial potential due to a combination of the economic outlook, corporate profits, and continued low-interest rates.

As a result, stock market valuations become attractive with a price-to-earnings ratio (P/E) of just 11.7 times, drawing in more investment.

"We believe that building a diverse portfolio will continue to generate attractive returns for investors," a VCBF representative said.

The VN-Index has risen by more than 13% since the beginning of 2024. New account openings have steadily increased during the first three months of the year amid active trading, reflecting investors' interest in this capital market. In March alone, over 160,000 new accounts were opened. Consequently, the average daily trading value of the market reached a record high of VND26.7 trillion ($1.05 billion), up 28% from February. This level marks a peak since early 2022.

The exchange rate has risen sharply recently, repeatedly hitting new records. The interbank’s USD rate surged to its highest level, exceeding VND25,300. Commenting on the exchange rate pressure, Tuan from Dragon Capital explained that this upward trend stems from the negative interest rate differential between VND and USD, volatility in the gold market, and the rise of digital currencies. Internationally, the US dollar index (DXY) reached 106 points for the first time in six months. This is because US inflation remains high, so the Fed is taking more time before deciding to cut interest rates. This goes against investor expectations.

The rise in the exchange rate is also influenced by the gold and cryptocurrency markets. The price of gold has been reaching new highs in recent days, peaking at VND85 million ($3,361) per tael. This encourages people to use hard currency to invest in gold instead of importing goods for production or business.

Dragon Capital highlights a close correlation between the exchange rate and the rise of cryptocurrencies. When Bitcoin surges, the black market exchange rate also rises, as investors tend to seek USD to invest in digital currencies. Despite the significant volatility, Dragon Capital's statistics still show that the VND is depreciating more slowly than other currencies in the region. Since the beginning of the year, the depreciation range of the VND has been lower than that of Thailand (7.5%), South Korea (8.3%), and Japan (9.4%).

"The market's reaction stems from being unaccustomed to volatility levels of up to 4%," Tuan commented.

To stabilize the situation, the State Bank of Vietnam has resumed issuing promissory notes, with a total value of approximately VND172 trillion ($6.8 trillion) as of April 13. Interest rates on promissory note interest rates have also increased. As a result, the one-month interbank interest rate has returned to 4%, leading investors to fear that the general market trend could also rise.