The potential reduction in interest rates by the Fed is expected to open up favourable investment opportunities in Vietnamese stocks, particularly in key sectors such as banking, import-export, retail, materials, industrial parks, technology and businesses with high dividend yields.

"Vietnam's economy has likely passed the bottom of its cycle, presenting a golden opportunity for stock market investments over the next three to five years," said Hồ Quốc Bình, head of the Portfolio Management Department at the Thanh Cong Fund Management Co Ltd (TCAM).

Due to the impact of COVID-19, Vietnam's GDP growth rate reached a low point in the first quarter of 2023 at 3.4% but has shown robust growth in recent quarters. The Government and major financial institutions share a positive forecast of GDP growth between 6% to 6.5% in 2024, he said.

Export figures have returned to positive growth, and although the global economic context has been challenging in the last couple of years, FDI capital inflows remain positive. FDI disbursement speed is currently higher than in previous years, making it a prominent factor driving the economy.

With decreasing deposit interest rates aimed at promoting economic development, Bình predicts that deposit rates will remain at 4.5% to 5.5% in the near future, providing a strong incentive for investors to allocate funds to the stock market.

The number of new stock trading accounts has experienced significant growth in recent years, accompanied by increased market liquidity, with average transaction values exceeding 15 trillion VND in the last three years. Investors' account balances at securities companies are currently at a peak, indicating a substantial influx of cash into the stock market, which may further increase with lower interest rates.

Foreign capital flows have seen significant net selling recently, primarily driven by the Fed's decision to maintain high interest rates, attracting money flow towards the US. However, Binh believes this situation will not persist for long. Vietnam is expected to be upgraded from a frontier market to an emerging market, with FTSE potentially upgrading Vietnam's stock market status in September 2024, leading to an estimated cash flow of 1.5 billion USD by 2026.

In terms of investment opportunities for 2024-2025, the expert highlights the banking sector as a leading force in the recovery of the VN-Index, given the solid internal resources and growth potential of Vietnamese banks. Additionally, sectors benefiting from the recovery trend, such as import-export, retail, and materials, are expected to perform well.

Furthermore, industries capitalising on the FDI trend, such as industrial parks and technology development, have displayed positive growth and are anticipated to continue on a favourable trajectory.

Lastly, there is a group of businesses characterised by attractive valuations, high dividends, and strong business fundamentals that present potential investment opportunities.

Asset allocation strategy

According to Binh, analysing and identifying good industries, stocks, or conducting thorough analysis is just the initial step. Equally important is the subsequent investment process, including adjusting the allocation between stocks and cash during different periods.

While investors anticipate the stock market to rise from 1,200 points to 1,500 points, it is important to recognise that continuous upward movement is not easily sustained, as there will always be alternating declines.

Nguyen Dong Hai, a member of the Investment Council and General Director of the Thanh Cong Fund Management Co Ltd, emphasises the company's approach of not solely pursuing short-term profits. Instead, the company focuses on understanding customer needs to design appropriate investment strategies.

The Federal Reserve (Fed) bases its decisions on economic and inflation data, including employment figures. Although US inflation has recently experienced a slight increase, it has decreased by half from its peak of around 7%. If inflation falls below 3%, it is likely that the Fed will reduce interest rates. Moreover, US employment data in the first quarter indicates signs of potential interest rate cooling and deceleration.

"This year, the US will lower interest rates. But it is difficult to predict the level and timing of the rate reduction. High interest rates for an extended period has persisted for too long. The golden opportunity is approaching," Hai said.

Vo Trung Cuong, the fund management director, highlights real estate as a highly favoured asset class among Vietnamese investors. Different asset classes possess complementary characteristics. In the case of real estate in Vietnam, the longer it is held, the more profitable it becomes.

However, it requires a substantial amount of capital, offers low short-term liquidity, and is subject to cyclical fluctuations measured in years. Nevertheless, real estate provides stability and popularity.

In recent years, stocks have emerged as a preferred investment channel for many individuals, including business owners with expertise in economics and finance, as well as young Gen Z investors. Stocks offer attractive features, particularly high liquidity, allowing for fast wealth accumulation.

According to Cương, investors may consider allocating their investments to both of these asset classes. Given the current low interest rates, stocks present a highly liquid investment channel that can deliver strong performance./.