Vietnam’s stock market will likely rally after the U.S. Federal Reserve (Fed) ceases its tightening cycle and loosens its monetary policy again, according to Yuanta Securities Vietnam (YSVN).
The latest strategic report by the brokerage firm expects the Fed to make three rate cuts this year, bringing its benchmark policy rate down by 0.74 percentage points from 2023 to 4.59%.
Based on historical data, Vietnamese stocks tend to go up following the Fed’s monetary easing. For example, after the Fed cut rates to support growth in 2020, the benchmark VN-Index, which tracks the Ho Chi Minh Stock Exchange, soared from 700 to an all-time high of 1,500-plus.
Global inflation is forecast to cool to 5.8-5.9% this year and the figure in Vietnam to stay below 4%. Waning inflation will prompt major central banks to loosen policy in 2024. Interest rates in Vietnam will likely remain low in the first half of 2024 and inch up in the latter half, the YSVN report says.
Earnings per share (EPS) of Ho Chi Minh Stock Exchange-listed firms is predicted to rise 28% against 2023.
The report points out two supporting factors for Vietnam’s stock market this year: the long-awaited launch of the Korea Stock Exchange (KRX) trading system accompanied by new financial products; and the expected upgrade to emerging market status in September after the pre-funding issue is settled.
The brokerage firm outlines three scenarios for the VN-Index. In the baseline scenario, the gauge can rise to 1,414 points, or up 25.13% against end-2023. In a more optimistic scenario, it may hit 1,583 points and in the pessimistic one, 1,183 points, up 40.13% and 4.71%, respectively.
The VN-Index closed Thursday 0.22% down at 1,170.37 points. It rose 12.2% last year.
Hanoi-based Vietcombank Securities (VCBS) last month forecast the index to reach 1,300 points in 2024 on the back of low deposit interest rates at commercial banks.
Similarly, Tien Phong Securities has forecast the VN-Index to hover around 1,387 points in 2024, equivalent to a growth rate of 10% for the whole year.