Experts express cautious optimism for Vietnam stock market

Nguyen Duy Hung, chairman of SSI, a leading Saigon broker, said that with a drop of over 20 percent from its peak, when the VN-Index climbed to 1,204 points on April 9, 2018, Vietnam’s stock exchanges have entered a bear market.

The benchmark VN-Index on the Ho Chi Minh Stock Exchange lost 1.52 per cent to end Thursday at 878.22 points. On Friday afternoon, it rose to 880.9 points.

Perhaps it will take between 8 to 11 months for the market to recover, Hung said. "Historical data suggests that it would take 21 months for a bear market to recover its old peak after hitting bottom."

But the SSI chairman said the main challenges facing the stock market in 2019 include worries posed by the escalation of the U.S.-China trade war, and increasing geopolitical risks.

"At this point, no one can say how this war will unfold or predict how widespread the impact will be. Along with the decline in oil prices signaling difficulties of the world economy, the rise in geopolitical risks paint a picture of uncertainties for 2019," Hung said.

Also mentioning key challenges for 2019, Securities Commission chairman Vu Bang named the slowdown of Chinese and global economies, the escalating trade war and risks from expanding global debt.

However, these challenges come with opportunities to be seized. The trade war, according to the SSI chairman, is a chance for Vietnam to increase its exports. This does not mean market share growth will happen immediately, he said, explaining that it was an opportunity to build a medium to long term strategy, innovating the country’s economic growth model based on production and commercial activities.

Vu Bang also emphasized the advantages of macro factors, saying the continuous high growth rate in recent years was a factor that would increase the attractiveness of Vietnam's market in the region.

Vietnam’s GDP growth of 7.08 percent in 2018 retained its status as one of the best performing economies in the world. It was the highest growth the country has experienced since 2008 and compared with the median estimate of 6.9 percent in a Bloomberg survey of 12 economists.

Offering a more optimistic view, Tran Le Minh, deputy general director of VietFund Management, said that the market in 2019 still holds several favorable factors, including the fact that the decline in VN-Index was relatively slower than in other parts of the world.

"Why is the market declining more slowly? The reality must be seen in macro factors, growth and the fact that foreign institutional investors continue to invest in the market. Cash flow from foreign investors will continue to be a highlight this year," said Minh, who predicted that the VN-Index will not fall below its current level by the end of 2019.

Foreign direct investment disbursement in Vietnam reached a record $19.1 billion in 2018, a year-on-year increase of 9.1 percent, according to the Ministry of Planning and Investment.

For the market players' perspective, 2019 is not going to be an easy year, experts say.

"With many unpredictable factors caused by geopolitical and commercial tensions, most analysts agree that the global economy is entering the end of a growth cycle and 2019 will be a difficult year for the stock market," said an analyst team with Rong Viet Securities (VDSC).

It will be difficult for Vietnam to buck the global trend, they felt.

Bernard Lapointe, head of research of Rong Viet Securities, told the Bloomberg recently that he was optimistic but not too optimistic about the market this year. He expects the VN-Index to stay within the 900-1,000 points range until the end of 2019.

Meanwhile, Michel Tosto, head of Institutional Sales and Brokerage of Viet Capital Securities, predicted that the VN-Index could reach 1,060 points at the end of 2019.