Vietnamese stock market continues strong upward trend

The market capitalisation of the Ho Chi Minh Stock Exchange (HoSE) has increased by approximately 550 trillion VND (23 billion USD), reaching nearly 5 quadrillion VND. As for all three exchanges, the total market capitalisation of the Vietnamese stock market has increased by approximately 660 trillion VND (27.5 billion USD) after a relentless two-month climb.

Investors watch stock market's movements (Photo: VNA)

The recent market uptrend has been supported by positive business performance from listed companies. According to broker VNDirect, the estimated net profit of 1,128 companies (accounting for 96% of market capitalisation) in the fourth quarter of 2023 rose by 30% compared to the same period in 2022. This growth is attributed to improved business activities of companies and the low base effect from the fourth quarter of 2022.

The net profit of the banking sector in the fourth quarter of 2023 increased by 22.5% compared to the same period, driven by accelerated credit growth, strong non-interest income (fee income, foreign exchange activities), industry-wide income growth of 20%, and a 5% reduction in provisioning expenses. The banking sector has played a leading role in the recent market surge.

The net profit of the real estate sector in the fourth quarter of 2023 declined by 19.6% compared to the fourth quarter of 2022, and 24% compared to the third quarter of 2023. However, the decline is primarily due to Vinhomes (VHM). Excluding VHM from the calculations, the net profit of the real estate sector still grew by 132% compared to the fourth quarter of 2022.

The positive performance in business activities of the two largest sectors, banking and real estate, has facilitated a smooth start to the year 2024 for the market. Many investors are expecting improved stock market performance this year after a challenging 2023. In fact, large organisations also hold high expectations for this prospect.

In 2024, Dragon Capital forecasts that the global landscape still poses challenges as global economic growth slows down. However, the domestic market will experience significant recovery as the low-interest rate environment has enough time to permeate the economy, stimulating consumer demand and igniting investment intentions of businesses and investors.

The government's commitment to continue flexible monetary and fiscal policies is crucial to reinforce the confidence of private enterprises. Analysts predict that the profit growth of the 80 largest companies will range from 16-18%, providing a solid foundation for the stock market to be the most attractive investment channel in 2024.

Individual investors account for over 88% of the market. The 12-month deposit interest rate at banks is only around 4.7%, which is not attractive compared to the expected market profit of 10.9% (based on a projected P/E ratio of 9.1 for 2024).

Other investment channels such as real estate have certain limitations, including the need for large capital, low liquidity, and investor concerns about the legal aspects of real estate projects. Therefore, there is a likelihood that significant amount of capital will shift to the stock market.

Moreover, foreign capital flows may improve with any positive market information, such as the untangling of pre-funding or new progress in the process of upgrading to emerging market status. Overall, Dragon Capital considers 2024 an attractive time to participate in the stock market.

Similarly, Pyn Elite Fund also expresses optimism about the market's prospects in the near future. The growth rate of Vietnam’s economy is showing signs of recovery, and there are positive profit prospects in the coming years.

Currently, the stock market has yet to reflect the pace of earnings growth of companies and the story of interest rate reduction. If domestic interest rates decrease, market liquidity will increase, and the expected strong growth in corporate profits will contribute to the overall profitability of the market.