Specialists and publicly traded companies are optimistic about the Vietnamese stock market in 2021, according to a report on Top 50 publicly traded companies’ prestige and performance 2021 conducted by Vietnam Report Joint Stock Company. As many as 72.73% of respondents believed that the stock market will remain active and progressive, with 52.38% anticipating that the VN-Index will grow by 20%-30% and 9.52% thinking that the gauge will advance 30%-40%.

According to some experts interviewed by Vietnam Report, the VN-Index grew by 10-20% in a normal year, but it advanced faster in this slightly strange year. The growth will be higher than usual, led by eight outperforming sectors.

Eight best performers

Finance - banking, steel and securities sectors have advanced strongly since the start of this year. The current question to investors, who are interested in the stock market, is which industries the cash flow will be channeled into in the near future. According to experts and publicly traded companies in Vietnam Report's survey, finance - banking, steel and securities industries will still maintain their upward momentum in the coming time. Powered by government-backed public investment, real estate and building materials industries have been benefited. In addition, real estate companies have boosted supplies in 2021 and this sector will be among good performers this year. The construction industry has been powerfully affected by price hikes of input materials and is forecast to face numerous difficulties this year.

Given the complicated development of the COVID-19 pandemic, many localities applied social distancing measures, helping accelerate the digital transformation in all fields which have benefited the information technology - telecom industry. The development of the electronics industry has also given rise to the expansion of the chemical sector that serves the semiconductor manufacturing industry. In addition, the high demand for detergents will also boost chemical stocks in the coming time.

As the pandemic has disrupted supply chains around the world and the demand for food is constant, its prices have gone up sharply. According to data from the Ministry of Agriculture and Rural Development, the export value of agricultural, forest and aquatic products was estimated at US$5.01 billion in May only, up 40.2% year on year, totaling US$22.83 billion in the first five months of 2021, up 30.3%. Many countries had to pile up their food reserves in the face of food security worries, thus facilitating food stocks to gain higher ground. When vaccinations are scaled up, countries ease their restrictions on immigration, transport costs and warehousing costs will decrease, and profit margins will be widened. Then, the advantage of agriculture, forestry and fishery will be evident, especially rubber, rice and shrimp sectors.

The demand for oil and gas is recovering, especially in big countries. Oil and gas stocks have fared very positively. According to the United States Energy Information Administration (EIA), oil consumption is forecast to rise by 6% to 97.7 million barrels per day in 2021. In addition, oil supplies are expected to be further tightened on political conflicts and stagnant production among other factors. Thus, if the market does not slide into a deep correction, energy stocks will continue to attract investors' cash flow.

Improving the legal framework for stock market

The world’s largest economy, the United States, has half of the population trading stocks. In Thailand, 17% of the population invests in stocks while the rate in China is 35%. Meanwhile, in Vietnam, this figure is still as modest as 3% as many people are not confident enough about the stock market. The percentage of stock traders in other countries showed that stock investing will be a megatrend in the future and gradually become an effective asset accumulation channel.

Over 20 years of development, Vietnam’s stock market has made certain achievements, with more listings over time and increased market capitalization. However, it still poses a lot of shortcomings that weaken attractiveness and sustainability of the local market, particularly governance transparency - a potential long-term barrier.

When a public company is well managed, it will reduce transaction costs, capital costs and risks while boosting business performance, thus strengthening investor confidence and promoting market development. For that reason, corporate governance is increasingly important, not only in countries but also in large institutions like the World Bank (WB), the United Nations Development Program (UNDP) and the Organization for Economic Cooperation and Development (OECD) which provide governance benchmarks.

In 2021, the Law on Securities 2019 and the Law on Enterprises 2020 came into force, highlighting regulations on corporate governance of publicly traded companies, shaping a higher legal framework and enhancing transparent and professional governance of public companies.

The new Securities Law includes many provisions to support individual investors and regulate non speculative cash flows, meaning to limit risky fundraising of companies. However, the Government still needs to find ways for stronger market capacity and public confidence in securities, protect the interests of minority shareholders and make the market more transparent and healthy.

To boost the sustainable market development amid COVID-19 pandemic outbreak, respondents in Vietnam Report's survey proposed six key solutions that need the support of the Government: Improving the regulatory framework for the securities market (85.71%); modernizing information technology for transaction and payment to create new financial products (80.95%); strengthening market management and supervision and strictly punishing violations for sustainable market development (52.38%); fostering equitization and divestment of State-owned enterprises (SOEs) for share floating on the stock market (47.37%); diversifying derivatives on the market (38.10%); and building the capacity for market intermediaries (38.10%).

In addition, 38.10% of respondents in the survey said that diversifying derivatives in the market and enhancing the capacity of intermediaries such as securities brokers, investment funds, depository centers and custodian banks is necessary to support the stock market. 2020 witnessed the rise of ETFs in the world and Vietnam had five new domestic ETFs, accounting for 70% of total domestic ETFs in operation. ETFs are popular and big in foreign countries. This type of funds reduces administrative costs by 30-40% compared to conventional funds owing to portfolio diversity, low transaction costs and arbitrage options. Besides, the operation model of ETFs is also easy to understand, the information is transparent and benefits stock investors. But, to successfully build and develop ETFs in Vietnam, support solutions are needed to improve the working capacity of ETFs and many other intermediary organizations.