Vietnam one of world's best performing stock markets in August

Hanoi - After declining in the first two quarters, the VN-Index showed signs of recovery in the first half of the third quarter.

Last month, the benchmark even witnessed an outstanding breakthrough with a gain of more than 74 points, or 6.2 per cent, over the previous month.

The strong recovery helped the VN-Index become one of the world's top performing stock markets in August, said the financial website cafef.vn, citing statistics from StockQ.

The index's performance surpassed most markets in the region, such as Malaysia, Singapore, Indonesia, and Thailand, with these markets' growth in a range of 0.5-4.3 per cent, but it just lagged behind the Philippines' benchmark, which was up 6.9 per cent in August.

Market capitalisation of the Hồ Chí Minh Stock Exchange (HoSE) also advanced by VNĐ300 trillion (US$13 trillion) last month, with an average trading value on three exchanges reaching VNĐ18.5 trillion, up 34 per cent month-on-month.

As the benchmark VN-Index ended last month at 1,280.51 points, its price to earnings ratio (P/E) was 13.67x, 12.95 times higher than that at the end of July, according to data from Algo Platform. The attractive valuation was one of the factors luring bottom-fishing cash flows to the market.

Last month's capital flows were circulated in many industries like retail, securities, chemicals, oil and gas, and construction materials, supporting the market's rallies.

According to VNDirect Securities Corporation, the index's rebound was driven by some events, including the easing inflation in the US and Việt Nam, the improvement of the domestic market's sentiment with expectations that the US Federal Reserve would slow down its rate hike in the last quarter of the year, and speculative cash flows.

Liquidity also recovered significantly, with the average trading value on HoSE of nearly VNĐ15.8 trillion per session in August, an increase of 36 per cent over the previous month. Liquidity bounced back in all sectors.

However, the liquidity's recovery was not in line with a gain in new investors. In July, the number of new accounts was only 198,988, a decrease of 57 per cent from the record set in June. This was also the lowest since last November.

Activities of foreign investors were also more positive after net selling in July. Their trading value totalled VNĐ45.46 trillion last month, of which they purchased nearly VNĐ23.3 trillion and sold VNĐ22.29 trillion. Therefore, foreign investors net bought a value of VNĐ980 billion, the monthly lowest value since the beginning of 2022.

In its latest update, VNDirect said that the current market's valuation is appealing to long-term investors, who are looking for enterprises with high profit growth.

With the strong growth of earning per share (EPS) during 2022-2024, the securities firm said that the Vietnamese stock market is still more attractive than in the past and other markets in the region.

Việt Nam is a bright spot among emerging markets with the forward P/E of 12.2x in 2022 and the predicted 10.4x in 2023, much lower than the average P/E in the last five years. The market's background is improving, and the correction is creating opportunities for disbursement for investors to build portfolios in the fourth quarter and 2023.

Meanwhile, according to Vietnam Maritime Commercial Join Stock Bank (MBS), the market is likely to be affected by the correction of the global market, but may quickly rebound thanks to the diversified cash flows. Therefore, the declines will be chances to restructure portfolios.

Data from the last ten years showed that September is always the month posting positive growth rate. Thereby, the domestic stock market may move in a different direction to global negative trends.

In its bullish scenario, if the VN-Index returns to 1,300 points, the cash inflows will rise to break over July's peak of 1,315 points and head toward 1,350 point-level. However, in the basic scenario, the index will trade sideways and hover around 1,280-1,305 points.

Shares fell sharply on Monday morning as selling pressure weighed on market sentiment.

Indices moved in different directions on Wednesday as investors' risk appetite countered lingering selling pressure.

The market traded cautiously last week with no big support force, as it closed on Thursday and Friday for Independence Day. It is unlikely to make a deep correction this week, but can continue to accumulate on a new price basis, according to experts.