Economist: VN Index does not reflect the economy

21-Jan-2021 Intellasia | The Saigon Times | 6:02 AM Print This Post

By the end of last week (January 15, 2021), the stock market in Vietnam was still in growth territory with the benchmark VN Index ending at 1,194.2 points and the HNX-Index at 225.27. The Saigon Times spoke with economist Nguyen Tri Hieu to get his insight into what is in store for the stock exchanges in Vietnam. Excerpts:

The Saigon Times: What do you think the growth of the stock exchanges reflects?

Nguyen Tri Hieu: Vietnam’s economy follows a K shape, with one branch going upward and the other going downward. This has also been the development pattern of many countries since the Covid-19 outbreak last year.

Many firms on the market here which operate with good results belong to the branch that is going up. They enjoy financial health, have liquidity and are very active, as we have recently seen.

These also include companies specialising in agriculture, but export-oriented companies, such as rice and some other agricultural products exporting to the United States as well as to the EU.

Meanwhile, a lot of small and medium enterprises have not been performing well, especially those in the travel, transportation and retail business sectors.

Besides, the Vietnamese securities market is also experiencing good growth due to low bank interest rates. This has led many people to withdraw money from banks and invest in stocks.

So, the VN Index now does not reflect the reality of the Vietnamese economy.

But does that also mean that Vietnam is lacking investment instruments?

Vietnam’s economy is in a developing stage. And the investment tools, as I see them, are also relatively complete.

For example?

We have stocks, government bonds, corporate bonds, real estate, gold… These are enough to meet the needs of investors.

Of course, derivative securities are not yet fully developed. However, Vietnamese investors are not very interested in derivatives and prefer to use suitable traditional tools such as investing in stocks.

And what can we expect for the stock market, say at the end of the Lunar New Year?

We still have to wait and see because there are two factors that greatly affect the stock market: the pandemic and the world political situation, especially in the United States.

The pandemic across the world continues raging, especially in the US, because the virus has mutated although there are vaccines.

However, in the first quarter, the Vietnamese stock market will continue to rise. And maybe also through the second quarter. But from the third quarter, they will depend on the pandemic situation around the world.

The political situation in the US also has a direct impact on the world political situation and on the stock exchange markets everywhere. The Dow Jones Index was up to 30,000 points, the highest level so far.

If the transfer of power in the US goes smoothly and the political situation stabilises again, the US stock markets will continue going up, thus affecting Vietnam’s stock markets in a positive way.

But some observers have warned that the danger of a bubble will crop up if there is no mechanism to reduce the amount of money being pumped into the stock market here. Your comment?

I agree with them. There are still no signs of such a bubble. However, if the State Bank of Vietnam keeps pouring money and bank interest rates continue decreasing, there is a possibility that bubbles will occur.

For the first quarter, since there will be a lot of money being spent on shopping and travelling this Tet holiday, we would not see any bubbles in the stock market here.

We did see monetary easing in Vietnam, as seen in many other countries. Do you think that such a policy in Vietnam should continue, at least until the end of 2021?

At this moment, I support the monetary easing policy of the State Bank of Vietnam. This helps a lot of businesses, especially small and medium ones in the hotel, travel and transportation sectors, for instance.

This policy should at least continue by the end of the first quarter of the year. In the second quarter, a review of the business environment and the financial situation would perhaps be needed.

If the bank continues to lower interest rates further and pushes a large amount of money into circulation, it could contribute to inflation, something no one wants.


Category: Stocks, Vietnam

Print This Post

Comments are closed.