Research Center

Amid a widespread COVID-19 delta attack in the Southeast Asia region, Vietnam is stepping into the worst outbreak in both its health and economic impacts. Although the government actively deployed various solutions to follow the twin target that effectively controls the pandemic and promotes socio-economic development, the negative impact of economic recovery is inevitable. We predict that the COVID-19 economic impacts on domestic consumption and production levels would be partly reflected in oncoming macroeconomic updates under strict lockdowns nationwide.

Surging commodity prices and increasing inflation recently pose a considerable risk to global economic stability. However, the majority of global economists and monetary policymakers just saw this phenomenon as a transitory factor, and this trend would eventually reverse to a normal track in the medium- and long- term. Regarding Vietnam's situation, we saw a stable demand-supply balance in major commodities and well-controlled price conditions. The inflation shock in the near term, if it happens, would be expected to be transient and bear a little risk to the economic stability.

2021-early witnessed a hike in the U.S. government bond market among with upward pressure inflation, concerning investors about another taper tantrum similar to 2013 summer. However, we see different things compared to what occurred in the 2013 summer, indicating the chance of a sooner-than-expected tapering to be smaller.

We forecast that the VNIndex in 2021 can reach 1,300 points thanks to promising opportunities from high-value chain shifts and potential benefits from FTA agreements such as RCEP.. Moreover, statistical evidence support the bullish market next year.

Biden’s ambitious plan may boost long-term economic growth, followed by an expansion in trade activities. As an essential trading partner, we expect U.S. stimulus policy to benefit the Vietnam economy in the long-run. However, Vietnam also faces uncertainties when the president-elect heavily focuses on strengthening domestic production and potentially change trade policy toward China.

High margin debt and the selling pressure of foreign investors cause the stock market to form a short-term peak. However, Vietnam economy recovers, along with the capital flow of ETFs that will support the stock market and continue its uptrend in the long term.

Although we expect the current rally of the market will continue in the rest of this year (because the VNIndex is trading at 15x its earnings, lower than 16x of 2019-end, while interest rate is lower), the pace will be slower and range trading may be more appropriate for the time being.

Because our year-end target for the VNIndex is still between 900 - 1,000, assuming that interest rate remains low and the economy recovers markedly, we expect to see the bullish scenario in September. Of note, FOL stocks may be the best performers given the consistent strong foreign inflow into VFM VN Diamond and SSIAM VN FinLead ETFs.

Given the current well-controlled virus situation, we maintain our target of 900-1,000 for the VNIndex by the end of this year. However, the outbreak of Danang teaches us that there is a high probability of another virus resurgence, another economic lockdown as well as another sell-off of the stock market and the recovery path will be intermittent, a new normal life.