Stock market remains an investment channel that attracts the cash flow of the majority of individual investors. (Photo: SGGP)
Important capital raising channel
The stock market wrapped the year 2021 with successes when it made records in terms of index, liquidity, and market capitalization. According to the State Securities Commission of Vietnam (SSC), by the end of 2021, the VN-Index reached 1,494.39 points, up 35.4 percent year-on-year. HNX-Index also touched 458.05 points, up 125.5 percent compared to the end of 2020. Market capitalization hit roughly VND7.73 trillion, up 46 percent compared to the end of 2020, equivalent to 122.8 percent of GDP in 2020 and 92 percent of GDP in 2021.
Noticeably, the year 2021 also witnessed a record increase in the number of newly-opened securities investment accounts, with more than 1.5 million accounts, much higher than the total number of new accounts opened in the previous four years. The number of investors participating in the stock market increased sharply, helping to push the market liquidity to billions of US dollars per trading session.
The leader of the Ho Chi Minh City Stock Exchange (HoSE), which accounts for more than 90 percent of the market capitalization of Vietnam’s stock market, said that despite being affected by the Covid-19 pandemic, many enterprises had successfully mobilized capital to restore production and business activities through the stock market. In 2021, the total value of capital mobilized through additional stock issuance on the HoSE was estimated at more than VND49.6 trillion, more than five times higher than that in 2020.
According to the latest updated figures of the SSC, the total capital mobilization on the stock market in the first 11 months of 2021 reached nearly VND445 trillion, up 23 percent over the same period last year. Capital mobilization for the State budget through Government bond auctions increased by 1.3 percent, with a value of nearly VND301.02 trillion. "The above results show that the stock market is an investment channel that particularly attracts domestic and foreign investors and has been confirmed as an important capital mobilization channel for the economy," said Mr. Tran Van Dung, Chairman of the SSC.
Panning the sand to find gold
Although the VN-Index conquered the 1,500-point mark again in the first trading sessions of 2022, it has dropped sharply in the last two weeks. The VN-Index had fallen by nearly 6 percent, or 100 points, in only seven trading sessions from 1,528.5 points on January 7 to 1,438.9 points on January 18. However, this drop is considered reasonable, especially after a long time that speculative stocks and real estate stocks escalated rapidly.
According to an analyst at Vietcombank Securities Company (VCBS), the VN-Index is forecast to top 1,580-1,600 points in 2022, an increase of about 6 percent-8 percent compared to the peak of 2021, based on the scenario that Vietnam's economy in 2022 will gradually regain the growth momentum as in the previous period. However, the risk of high inflation must be accepted. Interest rates may increase slightly, but in general, remain low, thanks to the abundant liquidity of the banking system.
According to financial experts, the stock market is still considered an attractive investment channel in 2022. However, investors will no longer make money easily like last year, but they will have to pan the sand to find gold. Stock growth in 2022 is not open to the whole industry or the speculative stock line, but it depends on the real and intrinsic value, as well as the prospects of the stock. Mr. Le Duc Khanh, Analysis Director of VPS Securities Company, said that the stock market is an investment channel that attracts the cash flow of the majority of individual investors because securities investment does not require capital as high as real estate.
In addition, international organizations also assess that Vietnam can grow well, thanks to FDI inflows and free trade agreements, so investment flows are expected to find potential markets, including Vietnam. Especially, when Vietnam's GDP growth rate is forecasted to reach 6.8 percent and 6.5 percent in 2022 and 2023, respectively, the VN-Index in 2022 will possibly surge to 1,600-1,800 points. Mr. Nguyen Duy Hung, Chairman of the Board of Directors of SSI Securities Company, recommended that investors should spare most of their stock portfolio for value investing because trading stocks following the calls of groups is extremely risky.
According to VinaCapital Investment Fund, Vietnam's stock market is currently at a reasonable price for long-term investment. According to data from Bloomberg, the profit of companies listed on the HoSE is forecasted to increase by 26 percent in 2022, while the P/E ratio of the VN-Index in 2022 is 13.4 times on January 18, much lower than the five-year average. In this context, investors will "disabuse" to realize the importance of selecting stocks for long-term investment instead of surfing or buying shares at top prices of fast-growing and highly-speculative stocks.
According to BSC Securities Company, banking stocks are expected to be the main driving force to help the VN-Index reach a new peak. Banking will be one of the leading industries, helping the benchmark surpass the mark of 1,500 points to reach 1,700-1,800 points in 2022 because credit growth is forecasted to rise sharply when the economy recovers. Along with that, this is the group with the largest market capitalization, so it cannot be without the contribution of king stocks for the general index to reach new highs. Besides, this year's investment trend will continue in groups that have had good growth but still have potentials, such as public investment, construction, fertilizer, and clean energy. Another investment trend is in industries that recover from the bottom of the pandemic, such as exports (textiles and seafood), and infrastructure support groups (seaports and industrial park real estate).
