Outside the headquarters of the Hà Nội Stock Exchange. — VNS Photo Ly Ly Cao

HÀ NỘI — A lower interest rate environment and policies to remove difficulties and boost the economy will be drivers for the stock market in the last months of the year.

The securities channel remains appealing, with the market's benchmark VN-Index up nearly 17 per cent since the beginning of the year, despite the tough economic year.

One of the main growth drivers of the market comes from low interest rates and expectations of supportive policies.

Agriseco Securities, in its recent report, said that cuts in interest rates will positively support cash flow into the stock market.

The State Bank of Vietnam (SBV) has reduced the operating interest rate four times in a row starting from the end of the first quarter of 2023, while commercial banks are also reducing deposit and lending rates to support businesses to recover and improve business performance. As result, this will increase the attractiveness of the stock market.

In general, lowering interest rates usually have a positive effect on the economy, but it takes time to digest.

Statistics of Agriseco Research showed that when interest rates decrease, the stock market move positively in the mid- and long-term. The bullish is normally reflected in the VN-Index after one year of implementation, and within one month since the interest rate cut, the market's trend is not clear.

According to Agriseco Research, in 18 cuts of the operating rate by SBV in the past, 17 times VN-Index advanced after one year (94 per cent of probability) and 10 times VN-Index ticked higher after one month (56 per cent of probability).

Growth momentum in H2

Also supporting the stock market, profit of the whole market is expected to regain growth momentum in the second half of the year.

The recovery is thanks to flexible monetary policies and expansionary fiscal policies to stimulate the economy, said Agriseco Research. Moreover, the liquidity bottlenecks have been solved while the global macro conditions are getting better as inflation is gradually cooling down and the interest rate hike cycle is at its final stage.

As a result, business results of many industry groups, such as seafood, textiles and timber, will rebound in the last months of 2023 after experiencing declines in orders from export markets.

"The domestic economy is also expected to recover, helping industries such as retail, consumption, construction and materials, achieve better business results in the second half of the year. In addition, in a declining rate environment, some industry groups, such as securities and real estate, are also forecast to benefit," said Agriseco Research's report.

Positive reversal in business results

The analysis team of Agriseco Research said that some industry groups that expect to a bullish reversal in business results in the second half of the year will magnet cash flow.

The securities group is considered to have positive business results in the rest of the year thanks to the high liquidity since the beginning of the third quarter, supporting the brokerage segment. Profit of proprietary trading is also expected to improve because of a favourable market.

Lê Xuân, an independent trader, said that stocks of companies with bottom profits in the second quarter are likely to rebound. "They are the groups seeing corrections in prices recently, including real estate, retail and energy industries," Xuân told Việt Nam News.

"In addition, investors should also watch stocks, like technology, that have maintained good profits in the last 1-2 years and have not been under any negative pressure from macro-economic impacts."

Given lower base prices of domestic crude steel and hot rolled coil (HRC), steel pipes and galvanised sheets producers for export will gain benefit.

Moreover, VNDirect Securities Corporation expects the electricity demand of industry and construction group to rise as disbursement of public investment accelerates in the second half of 2023, and the real estate market will warm up thanks to policies to help remove difficulties.

The securities firm also said that rising electricity prices help Vietnam Electricity (EVN) increase revenue and ease financial difficulties. Therefore, there is more room for power sources with higher prices.

As hydropower faces difficulties and renewable energy is not stable due to its high seasonality, thermal power will be used more in 2023, benefiting from the El Nino effects.