Unprecedented changes in 2022

Right at the beginning of 2022, the stock market suddenly broke through its historical milestone with the VN-Index surpassing 1,500 points on January 6. Liquidity exploded with billions of shares traded each session, peaking on January 10 with more than US$2 billion worth of shares changed hands. In April, the market capitalization on the Hochiminh Stock Exchange (HOSE) also set a new record of more than VND6,000 trillion.

The unprecedentedly exciting atmosphere was greatly boosted by massive influxes of new investors, with nearly 2.5 million new accounts activated. As of the end of November, individual investor accounts totaled more than 6.7 million, or about 6.7% of the population. Notably, at that time, the margin loan balance was at a record high of more than VND200 trillion.

New market records did not last long. After just over half a year, the VN-Index plunged from an all-time high of above 1,500 to as low as 874 points in mid-November. The measure is currently traded in the range of 950-1,050 points.

Repeated strong fluctuations made the VN-Index the worst performer in the world. Besides, many data showed that Vietnam's stock market was very volatile. In 2022, the measure experienced 19 days of extremely strong volatility, changing over 3% a day with two-days skewing downwards. Many days even witnessed more than 70 points gained or lost (about 5-7%).

When the market advanced strongly and more individual investors entered the market. Many companies manipulated stock prices or deliberately circumvented laws to issue bonds and trade stocks for illegal profits. Heavy, unprecedented fines against business leaders and managers of big companies like FLC, Louis Holding, Tri Viet Securities and Tan Hoang Minh showed efforts to make the market stronger.

The steadier stock market in 2023

The Vietnamese stock market in 2023 is forecast to remain more stable than in 2022. According to Shinhan Securities Vietnam (SSV), the VN-Index is likely to range between 1,000 and 1,100 points in 2023, which corresponds to a target P/E of 9x-11x. According to SSV, given weak cash flows, the market may be divided and highly defensive stocks with abundant cash, low debt and a solid foundation to overcome the difficult period will be preferred. In addition, stocks that benefit from the public investment may outperform the market when there are clear signals from drastic capital disbursement.

In the brighter scenario, inflation will fall faster than expected and the loosening monetary policy will be adopted to boost economic growth. The VN-Index may skyrocket to 1,200-1,250 points or 15-20%, and commercial lenders may lead the market in this breakthrough.

The market tends to be more stable because of many positive macroeconomic factors. U.S. inflation has shown signs of easing, the Fed narrowed rate hikes. The pressure on the domestic exchange rate is gradually decreasing and, especially, Vietnam's economic growth is still projected to be stable.

Many international institutions are still highly bullish about Vietnam’s economic prospects in the coming time. The International Monetary Fund (IMF) estimated Vietnam's real GDP growth to be the highest in ASEAN, reaching 7% in 2022 and 6.2% in 2023. Shinhan Securities Vietnam Co., Ltd (SSV) anticipated Vietnam's GDP growth at 6% in 2023, from 7.5% in 2022, and inflation is still likely to be controlled within the target of 4-4.5% because prices of oil and basic commodities are low.

Besides, according to experts, hardships are already priced in. The deep drop in the market brought the VN-Index to its lowest valuation in more than a decade (P/E at 10x) and opened up valuable investment opportunities for long-term investors. This will be an advantage on the upgrading path to an emerging market in the next one or two years. Recent net foreign buying partly showed attractive valuations. For more than two consecutive months, foreign investors were net buyers of VND27 trillion on HOSE.

Market stabilization solutions

To quickly address existing problems and restore investor confidence in the stock market, a representative of the State Securities Commission of Vietnam (SSC) said that, in the coming time, in order to ensure the continuous and smooth operation of the stock market, to boost sustainable, transparent market development and protect the legitimate rights and interests of investors, the SSC will complete the legal and institutional framework and review legal provisions and guiding documents regarding the stock market to immediately address inadequacies and obstacles to restore market confidence.

Regarding market supervision and inspection, the SSC will enhance the role and responsibilities of supervisory bodies, with a particular focus on securities companies to ensure a transparent and efficient functioning of the market.

Accordingly, as a frontline supervisor, the SSC will strengthen the supervision of securities companies in line with the Securities Law 2019 and guiding documents in order to promptly prevent and warn against market violations.

The SSC also said that there will be early warnings to investors of market risks (if any) and continue to step up inspection and strict handling of violations.

Regarding market organization, the SSC affirmed that it will accelerate the commissioning of the KRX information technology system in order to facilitate the deployment of new products and services and make sure that the market will work smoothly, continuously, safely, and effectively.

In addition, the commission said that it is directing related agencies to prepare a trading platform for privately placed corporate bonds in order to develop a transparent and secure secondary corporate bond trading market; and restructure securities companies and fund management companies according to the scheme approved by the Prime Minister.

The State Securities Commission will actively coordinate with international organizations to deploy solutions to soon upgrade Vietnam's stock market according to the roadmap to attract more foreign investors in the Vietnamese market.