VN-Index is struggling at 1,200 points, why?

On August 6, the stock market recovered strongly after a nearly 50-point plunge the previous day. Notably, the VN-Index regained 1,200 points to the delight of investors. Many people also shared images of the first time the index surpassed the 1,200-point mark in 2007. "Why is the stock market still struggling at the 1,200-point mark?", this is also the name of the talk show topic organized by Nguoi Lao Dong Newspaper on the same day at the newspaper's headquarters.

Not too negative

Speaking at this talkshow, Associate Professor Dr. Nguyen Huu Huan, senior lecturer at Ho Chi Minh City University of Economics, analyzed that there are many domestic and international factors affecting the Vietnamese stock market. First of all, political tensions in the Middle East have raised concerns about widespread conflict, affecting the recovery of the global economy. Changes in monetary policy in Japan - the world's third largest economy - have also greatly affected investor sentiment.

"These factors affected the international financial market in early August and spread to the Vietnamese market. Not only stocks but also Bitcoin and gold prices fell... creating panic. However, the impact was mainly psychological, because by August 6, international financial markets, including Vietnam's, had recovered quite strongly," said Mr. Huan.

In fact, the Vietnamese market has adjusted down before other markets in the world, many stocks have decreased by 40% - 50% since the VN-Index reached 1,300 points in June 2024, despite the domestic economy improving, businesses recovering well and interest rates and exchange rates being stable.

Dr. Dinh The Hien, an economic expert, explained that the current picture of Vietnam's stock market is not necessarily too bad, but because the market in the first and second quarters of 2024 has a lot of optimism in the context of the economy not really recovering as expected, businesses are still facing difficulties, the real estate market is still not bright, foreign investors have continuously withdrawn billions of USD for many months... so the adjustment is understandable.

Mr. Phan Nguyen Huu Phuong - Director of Ho Chi Minh City Branch and Senior Customer Director, DNSE Securities Company - also admitted that many stocks increased sharply in the second quarter based on the strong price increase compared to the same period last year. In some industries, P/E valuations were too high, up to 30, 40 or even 50 times, so when business results were not as expected, stocks fell sharply.

"In fact, the market is in a sideways channel, plus the net selling pressure of foreign investors of about 60,000 billion VND since the beginning of the year, so the recent market adjustment is not "too terrible" - Mr. Huu Phuong said.

Technically, Mr. Dinh Minh Tri, Head of Individual Client Analysis Department - Mirae Asset Securities Company, said that VN-Index is in the second wave of adjustment, the decrease can be up to 150 points, so the market performance in the past 4 weeks is not too worrying.

"With the recent drastic moves of the Government, the Ministry of Finance and the State Securities Commission, Vietnam may be considered for upgrading in March 2025 and the market's uptrend may return from around September this year when the cash flow is activated," said Mr. Tri.

Waiting for better quality goods

Regarding the question of why stocks are still struggling at the 1,200-point level, experts participating in the talk show of the Lao Dong Newspaper pointed out many influencing factors. Associate Professor, Dr. Nguyen Huu Huan analyzed that in the Vietnamese stock market, stocks in the large-cap group account for a large weight, so they have a stronger impact on the market and the indexes. This leads to a situation of "green on the outside, red on the inside" when stock prices decrease but the VN-Index still increases and vice versa.

To solve this situation, many proposals suggest that there should be more index sets, classifying index groups, not only VN30 but also other index sets to better assess the market growth rate.

"VN-Index still has certain disadvantages, such as: If the index exceeds 1,300 points, the P/E will increase compared to the region, so it is easy to face profit-taking pressure. The number of quality stocks on the market is there but not much, it is necessary to diversify more listed companies and diversify products for the market... When the internal strength is not commensurate, it is very difficult for VN-Index to reach 1,500 - 1,600 points" - said an expert from Ho Chi Minh City University of Economics.

According to Mr. Phan Nguyen Huu Phuong, the 1,200-point mark of the VN-Index is often mentioned because investors are "obsessed". In fact, if calculated from 2009 to now, the "bottom" of the market has tended to increase, not decrease. "If the VN-Index drops to the lowest point in this correction, it will only be 1,100 points, which is 900 points higher than the bottom of 2022. That means long-term investment is profitable, not a loss" - Mr. Phuong argued.

Sharing the same view, Mr. Dinh Minh Tri said that VN-Index is at 1,200 points but many stocks have capitalization scale increased dozens of times compared to the time of listing, besides companies falling into the saturation zone, thereby affecting the general index. VN-Index does not increase in points but there is still positivity.

How to make the stock market grow more substantially and sustainably? Experts from Mirae Asset Securities Company said that when foreign investors learn about the Vietnamese stock market, they all expect that there will soon be another wave of initial public offerings (IPOs) by large enterprises. Nearly 10 years ago (2016-2017), the wave of IPOs contributed to raising the market's level, creating a large amount of goods for the market. After that, many stocks rose to become stocks with capitalizations of billions of USD.

"But currently, the IPO process is slowing down or there is almost no IPO. Hopefully, the Government's policy will promote the equitization process of state-owned enterprises to attract foreign capital flows," said Mr. Tri.

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