Vietnam stock market up, down with many records in 2022

Vietnam’s stock market is about to end 2022 after several ups and downs, and many memorable records.

VN-Index among world’s top 4 worst performers

After the sublimation period of 2020-2021, the VN-Index, which tracks the performance of the Ho Chi Minh Stock Exchange (HoSE), has continuously plummeted in 2022. On December 23, the benchmark closed at over 1,020 points, down nearly 32% from the beginning of the year and being among the world’s top four worst performers. Compared to the peak of 1,536.45 points set on January 10, 2022, it has plunged by more than 33.6%.

The VN-Index's decline was attributed to reasons like the prolonged geopolitical tension between Russia and Ukraine, which led to a spike in crude oil prices, disrupting the global production and supply chain. In addition, high inflation after more than a year of loose monetary policy forced central banks to raise interest rates and stop injecting money into the economy.

Domestically, the market encountered continious shocks like the arrest of senior leaders at FLC, Tan Hoang Minh and Van Thinh Phat groups, affecting the sentiment of individual investors who account for 90% of the total of trading accounts. Other factors included rising interest rates and tightened credit for high-risk segments, including real estate and securities.

Strong action against stock market violations

At the beginning of 2021, the State Securities Commission repeatedly delivered a message affirming that it would strengthen supervision, improve the efficiency of management and supervision of the stock market, and strictly handle violations, ensuring market discipline to protect the interests of investors and the healthy operation of enterprises.

This message has been realized in 2022, with a record of administrative sanctions against violations in information disclosure of internal shareholders and listed companies as well as in corporate bond issuance consultancy of securities firms.

There were many criminal cases including the prosecution and arrest of former chairman of FLC Group Trinh Van Quyet on March 29 for manipulating the stock market; Do Anh Dung, former chairman of Tan Hoang Minh Group, and six accomplices for “defrauding to appropriate property” on April 5; and chairwoman of Van Thinh Phat Group Truong My Lan for “defrauding to appropriate property” on October 8.

"Frozen" corporate bond market and Decree 65

The corporate bond market experienced a "sublimation" period in 2018-2021 with Decree 153 on private placement and trading of privately placed corporate bonds in the domestic market and offering of corporate bonds in the international market.

VBMA data showed that the total corporate bond issuance value in 2021 reached VND658,000 billion ($27.9 billion), higher than VND643,524 billion recorded in the 2011-2018 period. Of which, nearly VND628,000 billion was issued via private placements. Real estate corporate bonds were valued at VND232,337 billion with an average term of 3.37 years.

As the overheating development of the corporate bond market posed many risks, state management agencies have taken strong measures to make the market healthy, notably the arrest of Tan Hoang Minh and Van Thinh Phat leaders.

After these developments, the corporate bond market was almost "frozen". According to the VBMA, the private bond placement value in 2022 was only VND244,015 billion ($10.24 billion), accounting for about 96% of the total issuance value, and representing a year-on-year decrease of 60%.

Meanwhile, businesses bought back nearly VND182,742 billion ($7.75 billion) worth of bonds, an increase of 38% compared to the same period in 2021.

Moreover, individual investor sentiment was severely affected, leading to a wave of capital withdrawal from bond investment funds. On the other hand, Decree 65 amending Decree 153, effective from September 16, further tightened conditions for issuing corporate bonds.

To solve difficulties facing the market, the Ministry of Finance and the State Securities Commission on November 23 held a meeting to listen to feedback from representatives of issuers and securities companies. Deputy Minister Nguyen Duc Chi affirmed that his ministry would review the legal framework, including freshly-issued Decree 65, and listen to the opinions of businesses to report to the Government and the Prime Minister for appropriate adjustments.

More than half a month after the meeting, the finance ministry devised a draft decree amending and supplementing a number of articles of Decree 65. The draft has introduced many important changes, which are expected to pave the way for partly removing multi-month bottlenecks in the corporate bond market, as well as handling about VND308.622 billion ($13.08 billion) of bonds maturing in 2023.

Two "colors" in stock trading of investors

Foreign investors started net buying Vietnamese stocks on November 3. Since then, they have maintained their net buying for four consecutive weeks with a total value of more than VND19,000 billion ($805.6 million) from November 3 to December 2. Foreign investors continued to net buy nearly VND9,800 billion ($415.52 million) in December (as of December 23), raising their net purchasing value in 2022 to nearly VND21,500 billion ($911.6 million).

In November alone, of the total net buying value of foreign investors, foreign ETFs, mostly Fubon, contributed VND4,500 billion, and domestic ETFs about VND1,100 billion. As such, ETFs accounted for more than 30% of the total foreign net buying value. The remaining VND13,400 billion was net bought by foreign investors through P-Notes - a type of derivative financial instrument called Participatory Notes, exclusively issued for foreign investors.

Contrary to the net buying momentum of foreign investors, domestic individual investors in November net sold nearly VND19,000 billion, the largest ever so far. In December (as of December 23), the group continued to net sell more than VND9,500 billion.

Many listed company leaders face forced selling

The forced selling of stocks held by leaders of listed companies took place mainly in the real estate and construction groups. The stocks of these groups dropped sharply following Tan Hoang Minh’s dropping of "deposits" for four auctioned land lots in Thu Thiem and under bond maturity pressure.

On December 22, Nguyen Van Dat, chairman of Phat Dat Real Estate Development Joint Stock Company (HoSE: PDR), announced that his over 3.5 million PDR shares was sold by order matching on December 21 as a result of securities companies’ forced selling. After the transaction, Dat's stake in the company fell from 43.48% to 42.95%.

Previously, from November to early December, Dat faced many force sells with a total of more than 30 million shares.

Similarly, on December 9, Do Quy Hai, chairman of Hai Phat Investment Joint Stock Company (HoSE: HPX), announced the forced selling of 295,500 HPX shares by securities companies. Between November 28 and December 8, nearly 20% of HPX's floating shares held by Hai and his family members were sold by securities companies.

Many other leaders of listed companies like Novaland Group (HoSE: NVL), DIG Corporation (HoSE: DIG), Ba Ria-Vung Tau House Development JSC (HoSE: HDC), and Hoa Binh Construction Group JSC (HoSE: HBC) were in the same situation.

Over half of a company's shares traded in one session

The November 30 trading session recorded a recovery of VN-Index, which increased by over 16 points (1.58%) to 1,048. The main highlight of the market that day was HPX that was "rescued" after a 10-session streak of hitting the floor price. At the same time, this ticker also set a new record on the Vietnamese stock market with 165.2 million shares traded on the day, accounting for 54.1% of the company’s total floating shares.

Previously, this record belonged to FLC, set on January 11, 2022 with 154.9 million shares changing hands for VND3,098 billion ($131.25 million).

Record liquidity in derivatives market

The derivatives market grew strongly in 2022, especially when the basic market entered a deep downtrend. Specifically, the average number of VN30 futures contracts soared from 10,954 contracts per session in 2017 to nearly 250,000 in the first 11 months of 2022. The volume of open interest (OI) also skyrocketed from 8,077 contracts in late 2017 to 49,170 at the end of October 2022.

In particular, the October 25 session recorded an average trading volume of 647.45 contracts, the largest level in the history of the derivatives market. Meanwhile, the IO reached the highest of 65,760 contracts on August 17.

Besides their positive role in retaining investment capital flow, derivative transactions were also said to have a negative impact on the basic market.

The State Securities Commission on November 30 issued a document approving the increase of the initial margin rate of VN30 index futures contracts from 13% to 17%, effective from December 15.

Record high number of new investors

According to newly released data from the Securities Depository Center (VSD), the number of new domestic individual investor accounts opened in May set a record of 476,332, double that of April. This number was also 76% higher than the old record of 270,011 accounts set in March.

However, following the decline of the VN-Index, the number of new accounts continuously plunged. November recorded 88,695 new accounts opened by domestic investors, down 8% against the previous month, marking the lowest figure since February 2021. November also marked the sixth consecutive month of new account decline.

Settlement cycle shortened to T+2

From August 29, the VSD officially shortened the settlement time for securities transactions to T+2 from T+3. It means that stocks will be in investors' accounts two days after the order is made.

The move is assessed as the result of the drastic direction of the Ministry of Finance and the efforts of the VSD, the stock exchanges and market members.

This is considered a breakthrough in the settlement cycle of Vietnam's stock market and is also one of the goals for market upgrading. It is expected to contribute to increasing the liquidity and attractiveness of the Vietnamese stock market.