Investor sentiment drags down stock market: regulator

Vietnam’s stock market has fluctuated strongly due to cautious investor sentiment amid global uncertainties and a less positive economic outlook, with the decline mimicking the worldwide downtrend, said the country’s State Securities Commission.

The regulator, or SSC, said Friday that both domestic and international conditions have affected investor sentiment. Many economies have taken post-pandemic recovery measures, therefore inflation has increased sharply in many parts of the world, resulting in the tightening of monetary policy worldwide. The U.S. Federal Reserve has so far this year raised its benchmark interest rates by 3.75 percentage points through six consecutive adjustments, the strongest increases since 1994.

Similarly, the Bank of England has increased its rates seven times in a row since December 2021, to 2.25%. The European Central Bank (ECB) has upped its interest rates three times in 2022.

The International Monetary Fund, or IMF, has lowered its forecast for the world economy’s growth to 3.2% for 2022 and 2.7% for 2023. The World Bank estimates global GDP growth would slow to 0.5% in 2023.

The ongoing Russia-Ukraine conflict, tensions among powerful countries, and China’s “zero-Covid” strategy continue to exacerbate global uncertainties and supply chain disruptions. Food and energy prices have increased accordingly, directly affecting the costs of doing business and increasing inflationary pressure.

In this context, stock markets worldwide have undergone fluctuations. As of October 31, 2022, SSC said, the world’s MSCI ACWI index had dropped 21.98%; France's CAC 40 index fell 12.3%, Germany's DAX index fell 16.63%, South Korea's KOSPI index decreased 23.82%, China’s Shang Hai index fell 19.89%, Hong Kong’s Hang Seng index plunged 36.48%, while the U.S. S&P 500 index fell 18.15% compared to the end of 2021.

Domestically, cash flows on the stock market have been affected by interest rate hikes, SSC noted. Following the Fed rate hikes, the State Bank of Vietnam has twice increased operating interest rates. Prior to that, the Vietnamese stock market had rallied last year and in the first quarter of this year. Amid subsequent unfavorable conditions, investors began selling-off to gain profits, with this selling pressure resulting in market downtrends, according to the regulator.

The authority said it has been implementing several solutions to the situation, including providing accurate information on Vietnamese policy, macroeconomy, stock market, and safety of the financial and monetary system to stabilize investor sentiment, and enhance transparency for the stock market.

The second is to strengthen inspection and supervision to strictly handle violations on the stock market, and protect the legitimate investor rights and interests. The regulator has been working with investigative agencies in probing serious infringements.

The government on September 16 issued Decree 65 amending Decree 153 to improve transparency in issuing corporate bonds via private placements, thus minimizing corporate bond risks. The new decree was drafted by the SSC.

The regulator said it has also made a comprehensive review of the Securities Law and related regulations to further assure safety and transparency in the stock market.

SSC has also adjusted the final settlement price on an expiration date in derivatives: the regulator does not pick the ATC (At the Close Order) price on an expiration date but takes the average price in the last 30 minutes before closing.