Stock market in 2024: Ready to position

The position of the Vietnamese stock market in 2024 will be strengthened based on sustained supporting factors such as low interest rates along with the Government's growth-focused policies.
Growth at a high level compared to countries in the Vietnam Stock Market region ended a relatively successful 2023. As of December 29, 2023, the VN-Index recorded an increase of 12.2% compared to the end of 2022 and recovered to 23.9% from the medium-term low in mid-November 2022, although it is still 26.1% lower than the peak set in April 2022. The total market capitalization reached nearly VND 6 million, an increase of 13.5% compared to the end of 2022. The capital/GDP ratio accordingly also increased to 58.4% from 55.4%.

% change in VN-Index from country to country. Source: SSI Research

According to the SSI Securities Company Analysis Center (SSI Research), compared to other markets in the region, VN-Index's 12.2% growth over the past year is still more positive thanks to monetary and fiscal policy leaning towards supporting the recovery of the economy. However, in retrospect, in order to achieve this level of growth, the domestic stock market had to go through a rather bumpy path. In the first half of the year, the mainstream market trend was sideways due to the cautious sentiment of investors. This is also the time to propose, discuss and enact a series of policies to untangle the bottlenecks in the real estate and corporate bond markets and support the economy back on a growth trajectory. In the third quarter of 2023, when supportive policies gradually ossified and the US Federal Reserve paused interest rate hikes, the market had a good breakout, but was then corrected again in the period from September 7 to October 31 due to less positive domestic economic data, increased exchange rate fluctuations, the State Bank sucking money through credit channels, and semi-technical pressure. The group shares the Vingroup family.

Market Capital/GDP ratio in 2018-2023. Source: SSI Research

In the last two months of the year, VN-Index recorded a gradual recovery and rebalance after the oversold period on the basis of attractively discounted valuations. Cash flow came mainly from domestic individual investors, mainly concentrated in the small and medium cap group (VNMidCap increased 32.2%; VNSmallCap increased 28.9%). The main leading shares of this group include DGC (+68.8%), LPB (+54.8%), VND (+64.8%), BSI (+199.3%), EVF (+100%) and CTS (+123.7%). However, VCB (+18.5%), HPG (+55.3%), BID (+26.7%), and BID (+26.7%) contributed the most to the general index's upward momentum. Recovery inertia may continue According to SSI Research, supporting factors for the Vietnamese stock market remain, such as interest rates at record lows, along with the government's continued emphasis on growth-focused policies.
SSI Research expects the stock market to continue to grow in 2024. In the first trading month of the year, the recovery inertia may continue but will focus on the group of stocks that have their own stories with 3 main themes. The first major topic that carries a supporting element is the details of the Government's action plan for 2024 and the legal documents adopted. January is usually the month that records a lot of macro-information, relating to the details of the Government's action plan for the whole year and the legal documents adopted. With the Land Law, the Law on Credit Institutions and some new circulars and decrees to be adopted, the Real Estate, Banking and Public Investment sectors can benefit. The second theme comes from the fourth quarter of 2023 business results, which is the first quarter of positive growth market returns after four consecutive quarters of decline. According to SSI Research, the total return of the SSI tracking stock basket (representing 85% of HOSE's capitalization and 65% of the total market capitalization) is expected to grow 12.1% in the fourth quarter. Among them, the main drivers came from the groups Materials (+419%), Non-essential Consumer Goods (+51.6%), Information Technology (+23.7%) and Finance (+22.7%). However, the market risk story due to supply chain disruptions cannot be ignored. Geopolitical tensions in the Suez Canal caused a sharp increase in shipping. This is a long-term risk and in the immediate future, the industry group related to Transportation/Logistics will benefit from the above event. SSI Research also noted that cash flow trends ahead of the Lunar New Year will often be highly volatile, as well as profit-taking likely to take place when the VN-Index has recovered 12 percent from a short-term bottom; or fears that volatility could return as recent U.S. economic data suggest the risk that the Fed may not cut interest rates as soon as expected. Therefore, SSI Research recommends that investors keep a balance between stocks and cash to take advantage of opportunities when market volatility occurs. In the forecast for the first month of the new year, SSI Research said, the VN-Index will follow a gradual positive movement with a fluctuation of 1,125-1,180 points.