Tight policy at head of priorities for 2023

This year, Vietnam’s benchmark VN-Index surpassed the historical threshold of 1,500 points and then plunged below 900 points, the lowest level in the past two years. After dropping to the threshold of 873 points, the market posted a strong recovery from mid-November with more positive movements, such as strong net buying momentum from foreign investors.

Speaking at a talk show held by Vietnam Investment Review on selecting stock portfolios last week, Hoang Viet Phuong, director of the Investment Consultant and Analysis Centre under SSI Securities, said a number of policies have been issued by the government to ease the pressure in the capital and currency markets. In November, the government set up a special working group to address problems in the real estate market.

“As soon as the exchange rate showed signs of cooling down and inflation was somewhat controlled, the government took measures to partially remove the liquidity problem in the short term for the banking system as well as in the capital market,” Phuong said, adding that the government is making efforts to keep interest rates at a more stable and reasonable level.

Earlier this month, the Ministry of Finance also submitted to the government a draft decree on trading private placements of corporate bonds in the domestic market and offering bonds to international markets. The State Bank of Vietnam also expanded the credit room for banks by about 2 per cent and urged local lenders to keep deposit interest rates at 9.5 per cent or below, to reduce lending interests and boost economic recovery.

Tightening monetary policy will remain a key focus of the global economy in 2023. Although inflation has begun to ease in some developed economies, such as the US and Europe, central banks still continue to send signals to keep interest rates high. The Bank of Japan’s unexpected hawkish shift sent shock waves through global markets last week.

Commenting on the outlook of the stock market in 2023, Nguyen Hoai Phuong, investment director of VinaCapital Fund Management, said that the recent fluctuations in Vietnam’s stock market are short-term risks due to the macroeconomic impact in the world as well as in Vietnam.

“Foreign investors see this as a valuable opportunity to increase disbursement in the Vietnamese market at an attractive price. Foreign investors are paying attention to the prospect of Vietnam’s economic growth in 2023 and they care about how consumption will change in the context of high interest rates and how bank liquidity and asset quality will change due to the subdued real estate market,” Phuong said.

She further noted that Vietnam’s stock market is expected to experience strong development on the back of the country’s long-term economic growth. The nation’s stock market capitalisation accounts for 60 per cent of GDP; meanwhile, this ratio is 260 per cent in Taiwan, 100 per cent in Thailand, 120 per cent in South Korea, and 125 per cent in India.

It is expected that investor participation in the stock market will continue growing vigorously in the years ahead. The market’s scale and the improved quality of investors will change the stock market toward sustainable development and less volatility.

Both experts agree that 2023 will be a bumpy year for investors due to the uncertainty in the stock market. “Investors should not bet on the industries with high risks until the problems in the industries are resolved and the policy obstacles are removed. Instead, they should allocate investments in defensive enterprises, with good cash flow and high dividends,” Phuong of VinaCapital said.

At the same time, financiers should opt for enterprises with a good stage of development despite the challenging market.

We were cautious in the second half of 2022 due to tightening monetary policy. Since the government issued supporting policies, our funds have begun to be disbursed. Next year will still be quite challenging for the equity market, mainly due to the uncertain timing of the supporting policies. Vietnam’s stock market may still experience fluctuations in the first half of the year, before entering a recovery phase in the second half of the year.

With a focus on stock selection, we believe this investment strategy will still perform well in 2023, especially in a tough and uncertain environment. As industries are hit by volatility, we give priority to businesses that can withstand difficulties. Businesses that make a breakthrough in recovery will deliver good funding performance.

There are chances for stock investors if they consider a long-term perspective for 2023. Many market challenges have been reflected in the valuation. I am anticipating the day when the supporting policies come into place to address the problems of the real estate market, the corporate bond market, and interest rates. We won’t know for sure when these policies will have a spillover effect on the stock market. However, we have the right to expect these improvements.

To avoid short-term fluctuations, retail investors should choose three stocks for long-term investment. They should pay attention to businesses with good fundamentals and competitive advantages, which can increase market share in the midst of the tough economic context.

Despite difficulties, the domestic stock market has seen a big increase in net buying thanks to a recovery in foreign investor confidence.