Low valuation a growth driver for Vietnam stock market in 2023

Low valuations and public investment will be among growth drivers for the Vietnamese stock market in 2023, said Ho Tuan Hieu, who represents Stockline, an independent consultancy in stock investments.

Market liquidity has been low in recent months. How long do you think this trend will last?

The 2011-2021 period saw a repetition. Vietnam’s benchmark VN-Index was gloomy for about 15-20 trading sessions before the Lunar New Year holiday because individual investors have been worried about the information gap before the festive holiday.

Data shows liquidity did not improve again after the Lunar New Year but recovered in the five sessions before it thanks to cashflows from institutional investors. Data also shows that in this period, the VN-Index increased.

However, it should also be noted that the 10-year period as I mentioned is also a short period.

I’d like to highlight that in the last two months, the index was driven by foreign investors. Their net purchases in just a short time exceeded VND30 trillion (more than $1.27 billion), a record for the Vietnamese stock market.

In the past two years, individual investors have accounted for about 85-90% of the market, helping the VN-Index set new records. But this story has changed and individual investors, in a tough time now, are no longer a driving force, and account for under 80%. On the contrary, foreign institutions have maintained net buying for many consecutive sessions, and professional investors have regained their important role as game changers.

I think this is eye-catching and promising for 2023, but it is difficult to predict in terms of size and trend.

What will be the growth drivers in 2023 for the stock market?

The first is low valuation. Cheap pricing alone can’t help push up the index, but it could be the foundation to help the market create a buffer zone against any crashes.

Second, the market downtrend in 2022 was due to a number of negative factors. However, they are expected to become less negative in 2023, so this is another positive thing for the market. I expect the U.S. Fed to be less aggressive in 2023 in managing monetary policy, and expect it to be more convenient for corporate bonds to be issued in Vietnam.

Vietnam’s public investment spending is also expected to support the market. China’s reopening might also help.

Foreign capital flows should be watched closely, but it’s difficult to predict this factor.

However, these positive factors ccould also pose risks. Meanwhile, Vietnam’s corporate bond channels has been frozen for a while and needs a way out in order to be able to support the real estate sector and the whole economy. This channel needs really effective solutions.

In such a context, which stocks should investors aim at in 2023?

Investors should keep an eye on the banking and securities groups. For stocks, it is not important to look at their prices; investors must decide when to buy. As I mentioned above, the time to buy may be when the said factors become positive.

However, I prefer stocks that could benefit from China’s reopening like construction materials, agriculture, fisheries, aviation, and industrial real estate. In 2019 in a similar context (things did not get worse but did not become better rapidly), stocks that rallied included technology, retail, and industrial real estate stocks.

In 2023, investors should make flexible combinations for their portfolios, including outstanding stocks and stocks that will become more attractive thanks to market conditions. It is important to make decisions based on market conditions and developments in different directions.

Investors had high expectations for Vietnam’s stock market in the last month of 2022. However, the VN-Index mainly underwent fluctuating movements, and struggled with decreasing liquidity and a prolonged downtrend.

The December 30 trading session closed at 1,007.09 points, down 2.8% compared to the beginning of the month. The matched trading value was only VND5.606 trillion ($237.2 million), the lowest in many months. This sideways trend with low liquidity is forecast to continue until the Lunar New Year, which begins on January 21, 2023.