Investors look at stock indices on a computer. The market was unlikely to fall deeply because Việt Nam's economy was growing stably and was highly appreciated by many international organisations. Photo tinnhanhchungkhoan.vn

Việt Nam's stock market has been the biggest decliner in Southeast Asia so far this year, but experts believe that the market will continue this downtrend in the future.

The VN-Index has fallen by 7 per cent since the beginning of 2022 due to investors' concerns about the wave of rising global interest rates. According to experts, the market's average price-to-earnings (P/E) in the next 12 months will remain only 9 times, the lowest level recorded since 2012. With this development, investors believe that the market will continue to fall below this level.

Nguyễn Đức Lâm, MBS Securities analyst, said that there were two scenarios for the VN-Index. In the first, the VN-Index retests 1,000 points but rebounds after that, returning to test the 1,063-1,073 zone. At this time, more investment opportunities will appear, but it is necessary to select according to cash flow and prioritise stocks that are stronger than the general market, and have support from positive business results.

In the second scenario, the VN-Index declines and fails to hold the support level of 1,000 points, it will continue to test deeper and is expected to touch 970 points. "At this time, there is no need to rush, but investors can open an exploratory buying ratio when the VN-Index retests the 970 zone, prioritising stocks that are stronger than the general market, especially stocks that do not violate the old bottom, but need to save participation in low proportions," Lâm said.

The industry groups greatly influencing the stock market movements are heavily dependent on credit. Capital from commercial banks is now the main capital mobilisation channel of most real estate businesses.

Recently, the State Bank of Vietnam (SBV) has sent cautious signals against possible fluctuations and risks as the Fed will certainly continue to raise interest rates by the end of this year and the strong appreciation of the US dollar will put pressure on Việt Nam's exchange rate, besides inflationary pressure.

According to VNDirect forecast total credit growth will reach nearly 13 per cent by the end of this year and it is unlikely that commercial banks will receive additional credit lines from now until the end of 2022 as SBV’s top goal is to control inflation.

In the context that it is very difficult to have more room opened with the current tightening monetary policy, banking and real estate stocks are forecast to face many difficulties and this will significantly affect the Vietnamese stock market.

Nguyễn Trí Hiếu, banking and finance expert, said that the market was unlikely to fall deeply because Việt Nam's economy was growing stably and was highly appreciated by many international organisations. American credit rating agency S&P Global Ratings on May raised its long-term sovereign credit rating on Viêt Nam to 'BB' from 'BB'. Moody's Investors Service has also upgraded the Government of Việt Nam's long-term issuer and senior unsecured ratings to Ba2 from Ba3 and changed the outlook to stable from positive.

“Việt Nam's economic growth is forecast to reach double digits in the third quarter and reach 7.8 per cent in 2022. In the long term, the stock market is still an attractive investment channel, however, with short-term fluctuations like at present, investors need to invest selectively and always put a positive attitude in investing, considering the stock market a long-term investment channel. Don't miss the opportunity in the long run because of the short-term investment risks,” he said.

James Bannan, director of investment fund Coeli Asset, said, currently, many quality businesses had great growth potential but their current valuations were lower than the average for many years. This was the golden time to buy in.

Ruchir Desai, director of investment fund Asia Frontier Capital said Việt Nam was still their first choice. The fund currently manages $87 million in assets in Việt Nam and other markets such as Bangladesh, Pakistan and Sri Lanka.