In December 2021, the market benchmark VN-Index could have surpassed 1,498 points if it were not affected by the holiday, Dragon Capital said in a recent report.

Small- and mid-cap stocks have recently risen quite strongly. But the question is whether this is a sign showing investors are gradually shifting back to the large-cap group.

Dragon Capital believes that as the economy returns to normal growth of 6-7 percent in 2022, good quality large-cap stocks, which reflect macroeconomic growth drivers, will return to the role as market leader.

Vietnam not only is one of the best growth markets globally in 2021 with a rate of 35.7 percent, but has also made significant progress in developing the domestic stock market. The market has 63 companies with capitalisation of over 1 billion USD. Daily liquidity regularly exceeded the new average of 1 billion USD, higher than other emerging markets. 

Besides, the number of new accounts opened in November has surpassed the total number in the whole of 2019. 

As the market liquidity increased sharply in the first half of 2021, the trading system of the Ho Chi Minh Stock Exchange (HoSE) was congested causing the market to stall, however, the problem was completely resolved in August. 

The exchange’s infrastructure will be fully upgraded when the Korean trading system comes into operation in the second quarter of 2022. In addition, the T 0 transactions will create a foundation for the liquidity to continue to increase. Futures, options and other derivative products will also be issued after that. 

Fundamentals show that 2022 continues to be a positive year, although the market has recorded outstanding gains last year, Dragon Capital said. 

With 72 percent of the population already injected with two doses of the COVID-19 vaccine and a fiscal stimulus package, the economic recovery process is only in the early stages. Dragon Capital expects a 22.6 percent increase in overall market earning per share (EPS), while the 2022 price to earning ratio (P/E) is only 11.8. This is an attractive valuation compared to the internal market and other markets in the region.

Dragon Capital assesses that 2021 was a challenging and difficult year for the economy and the new Government, but Vietnam has successfully overcome it. 

The country has flexibly switched from a zero-COVID strategy to “adapting and living with COVID”, and has successfully implemented the largest vaccination campaign in history in just seven months. 

And although many business activities were halted in the third quarter of 2021, the economy quickly recovered and accelerated again in the fourth quarter, with growth of 5.2 percent over the same period of 2020, supporting the whole year's growth to reach 2.59 percent, the report showed. 

By the end of 2021, Vietnam hasn’t returned to its pre-pandemic state with a 3.8 percent decline in retail sales, while foreign visitors to the country are still limit ed. However, with all achievements in 2021, Dragon Capital believes it will be a solid foundation for a promising 2022.

It also believes that the contrasting monetary policies of the US and China, with one side tightening while the other is loosening measures to support the economy, will offset each other's influence.

Therefore, their impact on emerging markets like Vietnam will also decrease significantly. In case that inflation remains at a low level in 2022, which is below 3.5 percent, the State Bank of Vietnam (SBV) will have more room to continue supporting monetary measures, according to Dragon Capital. 

Although the size of the economic stimulus package is not as large as expected, if implemented effectively, it will have significant positive impact on the economy, according to the report./.