Vietnam's stock market has a lot of potential for stable growth and recovery in the short term amid ups and downs in the first quarter.

Investors at a securities company in Hanoi. Photo: Viet Dung/The Hanoi Times

Deputy Chairman of the State Securities Commission of Vietnam (SSC) Pham Hong Son made the remarks at a press conference on April 6.

In the first quarter of the year, the Vietnamese stock market experienced fluctuations due to various domestic and international macro factors.

On the global front, major central banks continued their monetary tightening policies in response to inflationary pressures and economic recession. Meanwhile, the recent turmoil in US and European banks raised concerns among investors about the safety of financial markets.

"Vietnam's stock market, like others around the world, has been affected by the challenging economic conditions," Son said.

Son also pointed to several challenges facing the domestic economy, such as the high interest rate environment and liquidity risks associated with individual corporate bonds and the property market.

"These difficulties have hurt the sentiment of domestic investors," he added.

Towards the end of the first quarter, the Vietnamese stock market received some positive news. The government implemented policies such as Decree 08/2023/ND-CP and Resolution 33/NQ-CP to support businesses and stimulate the economy. Public investment disbursement was accelerated and the State Bank lowered its key interest rates.

In March, the implementation of these measures led to the domestic stock market experiencing its longest recovery period since August 2021, with the benchmark Vn Index rising for nine consecutive sessions, he said.

By the end of March 31, the VN-Index reached 1,064.64 points, showing an increase of 57.55 points (+5.71%) compared to the end of 2022 when it was 1,007.09 points.

The combined market capitalization of the three major stock exchanges, HOSE, HNX and UPCoM, was VND5,400 trillion ($230.2 billion), an increase of 3.3% from the end of 2022.

This market capitalization represented 56.7% of the estimated GDP in 2022. However, stock market liquidity remained subdued in the first quarter of 2023, with an average trading value of about VND11.3 trillion ($482 million) per session.

In the first quarter of 2023, the number of investor accounts participating in the market increased. As of February 2023, the total number of securities accounts reached nearly 7 million, an increase of 1.45% compared to the end of 2022.

Foreign investors also showed positive activity, with net purchases of shares and fund certificates worth about VND7 trillion ($300 million) from the beginning of the year to the end of March.

"This indicates that the stock valuation is attractive for foreign investors who have a medium- to long-term investment strategy," Son said.

Solutions for the market’s sustainable development

The SSC representative pointed out that the performance of the Vietnamese stock market will depend on macroeconomic policies and economic prospects, both domestically and globally.

Although the trend of monetary tightening is slowing, the global economy still faces challenges and uncertainties, Son said.

Domestically, Vietnam's economic growth in the first quarter was below average and listed companies continue to struggle with the impact of Covid-19.

Nevertheless, Vietnam's economy still has many bright spots compared to other countries, as evidenced by international organizations' positive assessment of the country's economic outlook, Son said.

"We expect the government's efforts to address problems in the property market, corporate bonds, public investment, and lower lending rates to have a positive impact on the Vietnamese economy, boosting production and business activities. With a price-to-earnings ratio of 11.x, the Vietnamese stock market presents itself as a very attractive choice for long-term investment, especially when you consider that it is lower than the majority of other markets in the world," Son added.

To support the market's development in the future, Son added the SSC is reviewing the overall provisions of the Securities Law and guiding documents to address existing inadequacies and obstacles, ensuring the transparent, sustainable, and healthy development of the stock market.

He added that the SSC is accelerating the deployment of a new information technology system to facilitate the implementation of new products and services while ensuring the market's transparency, continuity, safety, and efficiency.

It is also working on restructuring the stock market, improving the quality and competitiveness of market intermediaries by restructuring securities companies and fund management companies, and at the same time directing related parties to set up a platform for individual corporate bond trading, which will enhance transparency in the secondary market.

For a transparent and efficient market, Son said the SSC will focus on enhancing the roles and responsibilities of supervisory lines, improving the quality of human resources for inspection and supervision, and upgrading the transaction monitoring system.

The SSC will also closely monitor economic and stock market developments to proactively come up with appropriate solutions. In addition to supporting market development, the commission will strengthen inspections and strictly handle violations to increase deterrence and promote market discipline and sustainability. Moreover, it will actively collaborate with international organizations to upgrade the Vietnamese stock market to emerging status and attract foreign investors by the set roadmap.