The benchmark Vn-Index is forecast to expand by 15% at the end of 2023 to hit 1,160 following a turbulent year for the stock market, according to SSI Securities Corporation (SSI).

Investor at a securities company in Hanoi. Photo: Pham Hung

The Vn-Index from its peak of 1,530 in early 2022 plummeted to a low of 874 in mid-November, a downturn which experts attributed to major events, such as the Russia-Ukraine conflict, arrests of business executives for market manipulation, and the Government’s tightening credit into high-risk fields.

As of late 2022, however, the market’s price-to-earnings (P/E) ratio was considered quite attractive with an estimated 9.2x, 35% lower than the average rate of 14.16x during the 2009-2022 period.

SSI’s latest report also pointed out another positive factor in the expectation of a more stable value of the Vietnamese Dong (VND) this year.

In contrast, liquidity risks remain a major issue due to the huge number of maturing bonds that are putting the burden on businesses, estimated at VND790 trillion (US$33.63 billion) in the 2023-2024 period.

“Interest rates may reach their peak in 2023 and then go down,” stated the SSI, but warned the decline would take time, an implication of challenges that the real estate market continues to face.

SSI, however, noted growing optimism thanks to the government's drastic efforts to resolve bottlenecks in the capital market, including the revision of decree no. 65 to create favorable conditions related to bond trading for private domestic and foreign investors.

“The Government’s active stance to address macro challenges would fuel the stock market development in 2023,” stated the securities firm, but added it would be too early to bet on the market’s return to peak.

SSI highlighted three major trends in 2023, including public investment, China’s reopening of the economy, and foreign direct investment (FDI) inflow.

For years, a strong disbursement of public funds has catalyzed the stock market’s development, but in fact, the actual disbursed speed has been below the targets.

The Ministry of Finance announced the allocation of VND726,000 trillion ($30.5 billion) for investment development this year, higher than the $27.2 billion in 2022.

Meanwhile, the reopening of the Chinese economy would mean the return of its tourists to Vietnam, accounting for 32% of international tourists to the country in 2019.

SSI forecasted the tourist figures would gradually increase since the second quarter of 2023 and surpass the 2019 number in 2024.

“This would mark the full recovery of Vietnam’s aviation industry,” it said.

The stock market entered the correction phase during the first transaction session of the 2023 Lunar New Year (January 30-February 3) as the Vn-Index closed the week at 1,077.15, down 40 points from its previous position.

This marked the first decline of the index following four weeks of consecutive rise since 2023.

SSI, nevertheless, expected the market to start going up after a long period of a downtrend, and noted it needs to consolidate gains before moving to the uptrend phase.

Stocks suffering the largest decline in value in the past week were those from finance companies, losing an average of 4.8% of market capitalization, followed by IT firms (-4.3%), consumer companies (-4.1%), and oil (-3.8%).