Stock market reaches crucial juncture, underscored by tentative positivity
Vietnamese Stock Market Reaches New Heights Amidst Global Monetary Easing and Dow Jones Today's Influence
The Vietnamese stock market has been on an upward trajectory, with the VN-Index advancing more than 400 points since the start of the year and reaching a record 1,688 points at the end of August. This growth can be attributed to several factors, including an accommodative policy stance domestically and global monetary easing, as reflected in the Dow Jones today's movements.
Vietnam's economy continues to pursue low lending rates, strengthening retail consumption, and has fiscal space for public investment to expand further. This accommodative policy stance has contributed to liquidity in the market reaching new heights, with trading value regularly exceeding $2 billion per session. On one occasion, trading value even crossed the $3 billion threshold.
However, it's not just the large-cap stocks that are seeing growth. The VN30 and mid-cap groups have broken through their historical averages. Despite this, the small-cap segment has lagged behind, trading at a price-to-earnings ratio of 12.9 times compared with its three-year average of 15.5 times.
Securities stocks have been a significant driver of this growth, accounting for 24% of market liquidity. Banking, on the other hand, makes up 30%. However, MBS warns that the rally may be reliant on only a handful of key names, as half of the index's 37-point gain in the final week of August was driven by just a few large-cap stocks.
The performance of securities stocks in the first half of September may provide a leading signal as to whether Vietnam will secure an upgrade to secondary emerging market status, as reflected in the stock market today's trends. This upgrade could be influenced by MSCI's (Morgan Stanley Capital International) market classification review in early October.
Global monetary easing has also played a role in the Vietnamese market's growth. The US Federal Reserve is expected to cut rates at its September 17 meeting, and the European Central Bank plans to bring policy rates below 2%. This monetary easing has led markets to price in an 87.6% chance of a Fed rate cut in September, reinforcing investor confidence worldwide, which is spilling into Vietnamese equities and influencing the stock market today.
Nguyen The Minh, head of Research and Development for Retail Clients at Yuanta Securities Vietnam, highlights the relative resilience of Vietnamese equities compared with other asset classes. Despite foreign net selling reaching a record $1.7 billion in August, making it the heaviest single month of selling on record, the market has continued to grow, as reflected in the stock market today's performance.
However, it's not all smooth sailing. Liquidity in the last week of August saw a 27% decrease compared to the previous week. MBS identifies FTSE Russell's market classification review in early October as the most important short-term catalyst for the Vietnamese market. Policymakers are expected to accelerate disbursement of public investment and credit growth in the final months of the year to help secure national growth targets.
In conclusion, the Vietnamese stock market has been on a growth trajectory, driven by accommodative domestic policies, global monetary easing, the relative resilience of Vietnamese equities, and the influence of the Dow Jones today's movements. However, challenges remain, and policymakers and investors will need to navigate these carefully to continue the market's growth.
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