Stock market to scale new heights this year: experts

The country’s benchmark VN-Index could reach up 1,850 points this year, up 21 percent from the new historic peak in January, as a new trading system provided by the Korean Exchange is set to give investors more confidence and reduce their concerns about transaction overloads, said James Estaugh, head of securities services at HSBC Vietnam.

The new system could also allow more trading mechanisms such as day trading, he said in a note. The current settlement process in Vietnam is T+2, meaning settlement occurs two business days after the day the order is executed.

Other factors that are set to boost Vietnam’s stock market up this year include the expected return of foreign investment.

Last year, foreigners net sold a record VND62.36 trillion ($2.75 billion) worth of local shares.

But the fact that there is still room for foreign ownership in blue chip stocks and exchange-traded funds put in a good performance last year could persuade foreigners to come back to Vietnam’s stock markets, Estaugh said.

Foreigners have started to net buy again in the first weeks this year, and more could be considering rejoining Vietnam markets as the country is set to be lifted to the Emerging Market status in the next several years, he added.

Michael Kokalari, chief economist at fund manager VinaCapital, said that the stock market will continue to rise this year on the back of an expected increase in the number of retail investors and the recovery of key sectors.

"We expect investor participation in the stock market to continue growing vigorously in the years ahead."

Vietnam may follow a similar trajectory as that of Taiwan in the last several decades, he said, adding that the number of stock market investors could increase three-fold over the next ten years.

Vietnam’s stock market surged nearly 36 percent last year, partly driven by a jump in the number of retail investors.

The country saw 1.53 million new retail trading accounts last year, 1.5 times higher than the total of the previous four years, according to the Vietnam Securities Depository.

This means around 4.4 percent of the population are investing in stocks, but Kokalari believes that this proportion "is still fairly small".

Corporate earnings are set to rise 26 percent this year and sectors set to post strong gains include banking, real estate, consumer discretionary (non-essential goods and services) and aviation-related businesses, he said.

Banks’ earnings are likely to grow by about 30 percent this year, driven by 14 percent credit growth, and the fact that Vietnam’s banks are less likely to be impacted by Covid this year, he added.

Real estate developers could see earnings rise by nearly 25 percent this year thanks to a near-doubling of sales of new housing units following a drop of more than 50 percent last year because of social distancing restrictions.

"Continued enthusiasm for investing in real estate – thanks in part to the low deposit rates banks pay savers – should ensure that property prices continue to increase in 2022."

As the pandemic has accelerated the trend of consumers shopping via modern retail channels like e-commerce, consumer spending should continue its rebound this year, Kokalari said.