Analysts and securities firms are hoping Vietnamese shares will perform better in 2019, but there are still many challenges that will clearly weigh on market sentiment. (Photo: vnexpress.net) Hanoi (VNS/VNA) - Analysts andsecurities firms are hoping Vietnamese shares will perform better in 2019, butthere are still many challenges that will clearly weigh on market sentiment.
The benchmark VN-Index on the Ho Chi Minh StockExchange (HOSE) finished last year at 892.54 points. Compared to 2017’s end, ithas fallen total 9.31 percent.
The benchmark index started soaring on January22, 2016 at 522.24 points and it took the VN-Index more than two years to touchits all-time high of 1,204.33 points on April 9, 2018.
In the first three months of the year, theVN-Index was one of the top three best-performing equity indices in the world.
A similar pattern was also seen in theperformance of the Hanoi Stock Exchange’s HNX Index, which hit its record highof 138.02 points on April 6 after having gained substantially by 87 percentsince January 22, 2016.
But in the last eight months, the two indices ofthe Vietnamese equity market have disappointed many investors and Vietnameseshares turned from investors’ favourites into a bear market.
Since its all-time peak of 1,204.33 points madeon April 9, the VN-Index has declined by nearly 26 percent.
In the same period, the HNX Index has droppednearly a quarter. The northern market index totalled a loss of 10.8 percent in2018.
What has weighed on the domestic marketdevelopment is poor investor confidence, which is mostly dependent oninternational events and can be broken easily if any negative news is heard.
In March, US President Donald Trump startedUS-China trade tensions by accusing China of illegal intellectual propertytransfer and unfair trade.
The two biggest economies’ tense relations ledthe world into a trade war, in which the US and China imposed dozens ofbillions of dollars of tariffs on each other’s exports.
The US central bank Federal Reserve in 2018raised interest rates four times with the latest one on December 19 as in itsview, the US economy had become strong enough for it to provide furthersupport. The Fed also signalled more rate hikes would be made in 2019.
Investors and traders also spent the whole of2018 worrying about the slowdown of the global economy, led by thesecond-largest economy China.
China is known as the biggest trader for manyeconomies, including Vietnam, so its economic slowdown is forecast to hurtthose economies’ exports.
Fears of the global economy slowdown also pushedoil prices down and tested the confidence of investors who believe in petroleumstocks.
In the last quarter of the year, Brent crudelost 37.6 percent from its one-year high of 86.29 USD a barrel while the UScrude WTI shed 40.6 percent.
Compared to the beginning of the year, the twobenchmark crude indices have fallen 19 percent and 25 percent, respectively.
Other negative factors included Brexit,geo-political tensions in the Middle East and Europe.
However, there have been positive signals comingout of the negative news.
In early December 2018, the US and China heldtalks during the G20 Summit and reached a 90-day ceasefire agreement, in whichChina must increase buying commodities, goods and services from the US and inreturn, the US will not further raise its tariffs on Chinese imports from 10 percentto 25 percent.
Regarding oil prices, members of theOrganisation of Petroleum Exporting Countries (OPEC) and non-OPEC exportersagreed to cut their production to boost market prices and are willing to meetin the middle of 2019 to discuss another output cut if needed.
Those pieces of news are expected to offsetglobal worries about the global economy’s future growth and trade relationsamong the biggest economies.
In addition, Rong Viet Securities Corporation(VDSC) said in its market outlook for 2019 that the VN-Index may top 1,000points this year because Vietnamese shares have fallen to more attractive pricelevels in the last nine months.
“The average of price-to-earnings ratio for thelocal stocks has fallen to 16x,” VDSC said. The figure is lower than that inIndia, Malaysia, Indonesia and the Philippines.
“There are stocks currently more expensive thanthe rest such as property developers Vingroup (VIC) and Vinhomes (VHM), andVincom Retail (VRE).”
According to Duong The Quang, General Directorof Dong A Securities JSC, there will be a lot of opportunities in Vietnam in2019.
“Vietnam recording the strongest growth rate inthe last eight years, at 7 percent, plus a stable foreign exchange rate and ananti-dollarisation policy, will help lure more foreign capital into theeconomy,” Quang said.
In 2019, foreign capital is expected to returnto emerging markets from developed markets, thus, boosting the prices ofcompanies with good quality, corporate governance and growth potential, hesaid.
In addition, “investors arehoping that the amended Law on Securities will be approved and brought intoeffect in the fourth quarter of 2019, allowing foreign investors to buy moreshares in the banking, pharmaceutical and telecommunication industries,” Quangsaid.
“If those expectations are met, the stocks inthose three sectors will receive higher investment starting in the thirdquarter of 2019.”
But in the first trading week of the year, theVN-Index is forecast to move narrowly around the 900 point level, according to NgoQuoc Hung, senior analyst at MB Securities Corporation.
“After some days off, investors are expected tobecome more optimistic. Stabilising global markets and positive macro-economicconditions will make them more confident in the domestic market,” hesaid.-VNS/VNA
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