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The VN Index on the Ho Chi Minh Stock Exchange inched down 0.22 per cent on February 1 to end at 908.67 points.
The southern market index has gained 1.8 per cent since the beginning of the year but recorded a slight weekly loss of 0.02 per cent before the holiday.
The HNX Index on the Ha Noi Stock Exchange rose 0.58 per cent during the pre-Tet trading week to finish at 103.34 points.
The northern market index, however, declined by 0.85 per cent from last year.
In its 2019 strategy report, VNDirect Securities Corporation (VNDS) expected the VN Index to “end the year at around 990 points, up 11 per cent from 2018 year-end levels.”
The company also said “Viet Nam’s stock market correction in 2018 after a heady 2017 rally has catalysed an ongoing transition from a momentum-driven investing strategy to a growth and value-based investing strategy.”
“With the market trailing price-to-earnings (P/E) having contracted to 15.5x, down from 21.9x at the 2018 peak, and estimated 2018 market-cap weighted earnings growth of 25 per cent, skittish foreign investors are likely to re-enter the market in force, albeit selectively.”
After being the world’s best performer in the first quarter of 2018 with a 19.3 per cent increase and peaking at 1,204.33 points in early April, the VN Index rapidly lost momentum and turned to one of the world’s worst performers in the second quarter of 2018 with a 19.7 per cent fall.
“The VN Index could breach the 1,000 point level, intra-year, if a US-China trade deal and Chinese fiscal stimulus materialise but the sentiment boost is likely to be transitory,” VNDS added.
Trade tensions between the US and China, starting in early March 2018, have been and will continue to be the main concern among global investors.
According to Dinh Quang Hinh, head of the market strategy division at VNDS, US-China trade tensions are one of two main factors that could have big impacts on the global financial markets in 2019 along with the tightened monetary policies of central banks.
“The tightening policies central banks such as the Federal Reserve (Fed) and European Central Bank (ECB) pursuit will consequently raise interest rates and make international capital return to developed markets, especially the US, from emerging and frontier markets,” Hinh told Viet Nam News.
“The increases of interest rates globally will pressurise Viet Nam’s lending rate levels, lowering investors’ interest in the stock market, as well as [influencing] foreign exchange rates and inflation,” he added.
“Many institutions have curbed their world economic growth forecast for 2019 by 0.2-0.3 percentage point as tensions cause negative effects on international trade and investment prospects,” he said, adding a slowing global economy may decelerate Viet Nam’s international trade in 2019.
“From our point of view, corporate earnings growth of listed companies is also predicted to decelerate in 2019 and that will also be a problem for the stock market,” Pham Tien Dung, deputy director of analysis and investment consultancy department at Bao Viet Securities Co (BVSC), told Viet Nam News.
The stability of the Vietnamese macro-economy was among the supporting factors for the stock market in 2019 along with the consideration of the Financial Times Stock Exchange (FTSE) and Morgan Stanly Capital International (MSCI) to put Viet Nam in their reviews on status upgrade, according to Dung.
Viet Nam would remain a bright spot in Asia-Pacific for international institutional investors thanks to the nation’s political and macro-economic stability, which had helped its stock market stand against global risks, Dung said in a note.
“If being enlisted in FTSE and MSCI’s status reviews, Viet Nam may lure US$1 billion worth of capital from global exchange-traded funds (ETFs), making it more attractive and less risky to global investors.”
“However, Viet Nam needs to enhance its market transparency and information accessibility for all investors regardless of their nationalities. Lifting the foreign ownership cap for local companies is another advantage to make foreign capital flow into Viet Nam.”
Banks take the lead
Amidst investors turning to defensive stocks such as consumer, consumer-related, power and automotive, banks would continue being the flagship of the stock market in 2019, according to analysts.
Chau Thien Truc Quynh, director of the brokerage division at Viet Capital Securities Corporation (VCSC), told tinnhanhchungkhoan.vn that bank stocks would remain the main driving force behind the market this year.
Among the 10 banks with the highest 2018 profits, Military Bank (HoSE: MBB) stood out as its shares had been undervalued and were fed off the the buying story, she said.
According to Nguyen Hong Khanh, director of the market analysis department at Vietnam International Securities Corporation, any changes in banks would be reflected in their share prices and any changes in their shares would have big impacts on the stock market, given the fact that a number of bank stocks have been added to the market’s blue-chip VN30 Index.