Macro-economic stability, over 80% of listed companies in 2020 being profitable, good containment of Covid-19 pandemic and the introduction of many new policies will further motivate Vietnam's stock market to grow stronger in the coming time.

Most listed companies are profitable

Ms. Ta Thanh Binh, Market Development Department, State Securities Commission of Vietnam (SSC), said, up to 82% of the listed companies were profitable in 2020 (according to unaudited financial statements of the fourth quarter of 2020). This rate was similar to pre-Covid-19 rates, specifically the fourth quarter of 2019. As Vietnam rose to occupy the largest share among MSCI's frontier markets after Kuwait was upgraded to an emerging market, Vietnam's stock market was expected to attract investment in frontier investment funds.

On April 1, 2021, the VN-Index staged unexpectedly strong growth of 24.66 points, closing the day at 1,216.1 - an all-time high. The liquidity reached more than VND22 trillion (nearly US$1 billion). Cash flows kept being pumped into the local bourse. On April 7, the gauge set a new all-time high of 1,242.38 points, making it one of the best performers in Asia.

Mr. Le Duc Khanh, Director of Investment Development, VPS Securities Joint Stock Company, said that Vietnam's stock market will thrive in 2021 because the GDP growth will be still positive and import-export activity will increase. FDI still picked up in the first quarter of 2021, the Purchasing Managers' Index (PMI) reversed to the upside. Many agencies believed that Vietnam's stock market will recover strongly this year despite the third Covid-19 pandemic outbreak of Covid-19 in the third wave.

Although foreign investors also continuously divested in the stock market, as much as VND10,800 billion sold by foreign investors was absorbed by domestic investors, he said. Fresh cash flows are being brought in by new investors and previously abandoned investors. According to data, the liquidity on three exchanges is about VND20,000 billion a day, which is likely to rise further.

He advised that, given macro recovery, funds will tend to invest in finance, construction, materials, port, oil and gas industries, and it is best for investors to give priority to stocks in the VN30 bluechip basket. Stock indexes will rise to new highs and stocks that catch attention will be defensive stocks and value stocks.

New products

In 2021, the SSC is expected to introduce new trading products on the stock market such as 10-year government bond futures contracts. In addition, new index futures, covered warrants and green bonds will also be studied. The SSC will also digitize financial assets on the stock market and apply new financial technologies.

The clearing and settlement system built on the central counterparty clearing (CCP) model and integrated with the new information technology system, expected to be put into operation by the end of 2021, will change the market structure and ensure security and stability.

The Securities Law 2019, three decrees and 11 guiding circulars that took effect in early 2021 will create a standardized legal corridor for development of a more quality, public and transparent market, according to international practices.

In addition, the establishment of the Vietnam Stock Exchange will help create a centralized stock market, provide favorable conditions for market supervision and development, and raise the position of the Vietnamese stock market.

Matters of concern

Former Chairman of SSC Vu Bang said that there will be some disadvantages for the stock market by the end of this year, including rising interest rates and reverse exchange rates.

“If the stock market rises strongly and interest rates are revised up internationally, this will give a weak point to the stock market. The current global debt has increased significantly, and this is also a volatile factor that needs to be noted,” he said.

As regards external factors, Ms. Ta Thanh Binh is concerned that U.S.-China trade war tensions potentially pose policy risks to the global economy and Vietnam's stock market in particular. This requires the demand of the market, especially the purchasing power of domestic investors, to be large enough to keep the growth momentum of the stock market alive.

According to Ms. Binh, trading order congestion will be completely settled in 2021 to ensure a smooth, orderly and stable market operation, and protect the rights and interests of investors. Some key solutions that will support Vietnam's stock market in 2021 in the coming time include focusing on law and policy enforcement, enhancing policy effects, submitting the stock market development strategy in 2021-2030 to the Prime Minister for promulgation to shape goals and solutions on the long-term development roadmap of the stock market and capital market, and further restructuring securities companies, fund management companies and other entities.