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Investors should flexibly deal with problems related to the stock market in 2017. Photo: N. Hien.

In 2016, by promoting stocks listed in the stock market, Vietnam’s capitalization increased by 30% compared to the end of 2015, equivalent to 42% of GDP. However, compared to the average market capitalization of GDP of four Southeast Asian countries at 88.6% including Malaysia (121%), Thailand (103%), the Philippines (82.5%) and Indonesia (48%), the market capitalization of Vietnam is still modest. According to BIDV Securities Joint Stock Company (BSC), the goal of market capitalization of GDP in 2020 at 80% (equivalent to $US 200 billion) of Vietnam is quite ambitious, but feasible. In fact, State-owned enterprises are promoted equitization and listed in the stock market within 1 year of equitization. In addition, there have been 777 unlisted enterprises in the stock market. However, in addition to goods with better quality, the market has also required a large amount of money to absorb the volume of goods in the near future. This is also a great challenge. According to BIDV Securities Joint Stock Company, in the short term, cash flow does not meet with the speed of divestments and new listings in the stock market, leading to a decline in the demand of the stock market.

According to a report of Vietcombank Securities Company (VCBS), a series of large enterprises listed in the stock market put heavy pressure on this market. This has caused cash flow to be dispersed and put pressure on stocks which have been listed first. At the same time, the fluctuations of the stocks listed in the stock market may create unpredictable changes to the overall index. Meanwhile, the amount of money added to the market can cause a high risk of changes in exchange rate, which impacts the psychology of investors.

For foreign investors, to December 2016, 2 ETFs in the market withdrew $US 71.01 million of Db-x trackers FTSE Vietnam and $US 78.53 million of VanEck Vectors Vietnam. Many experts said that in 2017, the pressure from a raise of interest rates from the Fed would make foreign capital flows withdraw out of the domestic market. This causes trouble for the market to stabilize the cash flow in the short term, which needs to meet a new alternative cash flow to ensure stable liquidity. Meanwhile, if the domestic cash flow is not sufficient, it may lead to the shortness of demand in the stock market, especially when the hot flow of Pnote (certificate of participation) is withdrawn dramatically. Notably, along with the decision to raise interest rates in 2016, the Fed also announced plans to raise interest rates three times in 2017, with an increase of 0.25% each time, and to 2018, the interest rate of the Fed will be at 2.125%. This roadmap will continue to limit the amount of foreign investment into the domestic market or change the cash flow in the short term after the disclosure of the Fed.

Meanwhile, VCBS has forecast that uncertain factors may force the central banks (outside the Fed) to maintain measures to promote the economy. Accordingly, the Vietnam market can receive benefits from foreign capital flows which are mainly from Asian countries such as China, Japan, Taiwan (China) and Korea. However, the Vietnam market may face unpredictable risks such as a change in policies of the new US President, along with the impact from Brexit, especially the monetary policy of the European Central Bank and the Bank of England to avoid the risks arising from Brexit. On the other hand, Brexit can make other member countries of the European Union leave the EU. In addition, CNY has been undervalued, putting pressure on the exchange rate of vnd in 2017.

In the difficult context, investors need to have the flexibility in handling problems, closely monitor potential groups which can create opportunities for investors. Accordingly, the experts have noted that investors should pay more attention to stocks with potential and good growth, especially the blue chips with a high level of P/E (price coefficient on income), particularly in building materials, construction and building infrastructure.

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Experts have also appreciated the business group which benefited from the trend of commodity prices for natural raw materials, contributing significant impact on core business activities; the businesses group with a good reaction when the market value declines in the second half of 2017, the beer and aviation service group with the possibility of allocating funds, which can make a great contribution to the overall index.