Yen carry trade unwinding exerts no direct impact on Vietnam stock market: analysts
The unwinding of the yen carry trade exerts no direct impact on Vietnam’s stock market, even as it is facing external risks, says KB Securities Vietnam JSC (KBSV).
In its report on the stock market outlook for August, KBSV cited Bloomberg’s estimate that Vietnam’s benchmark VN-Index has a P/E ratio of 14, below the two-year average of 14.9.

Investors monitor stock prices. Photo courtesy of Saigon Times magazine.
The continued low interest rates are expected to drive the recovery of manufacturing, industry, investment, and domestic consumption. In the short term, the second half of the third quarter is anticipated to bring new opportunities for the local securities market, the firm said.
Additionally, Vietnam has been focusing on resolving issues to secure a stock market upgrade from FTSE Russell this September. However, KBSV cautioned that ongoing delays in the operation of the KRX system could jeopardize this upgrade.
Importantly, external risks could also play a significant role, KBSV analysts noted. Escalating tensions in the Middle East could negatively impact oil supply and increase shipping costs, potentially leading to a resurgence of inflation.
Furthermore, some US macro indicators, including unemployment, consumption, and tech corporate earnings, are weaker than expected, causing concern about a potential recession in the world’s largest economy.
KBSV also highlighted the sharp rally of the Japanese yen following the Bank of Japan’s interest rate increase to 0.25% and the weakening of the U.S. dollar due to high expectations of rate cuts by the Fed.
The yen’s appreciation has triggered the unwinding of the yen carry trade, forcing investors to buy yen to cover their previous positions. This has pushed the currency higher and led to further margin calls.
Still, the unwinding of the yen carry trade has not directly impacted Vietnam’s stock market yet, as Japanese investment flows into Vietnam primarily through official development assistance, foreign direct investment, and financial institutions. However, it is necessary to consider the indirect effects, particularly on investor confidence, KBSV suggested.
Assessing the potential impacts of these risks on Vietnam’s securities market, KBSV noted that while geopolitical factors are unpredictable, the risks of a US recession require careful consideration. A mild US recession could adversely impact Vietnam’s exports but might positively influence the local stock market when considering exchange rates and the central bank’s monetary policy.
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