Growth in the stock market will be underpinned by steadily improving macroeconomic indicators this year and the next, allowing the VN-Index to hit 1,085 points by the end of 2020, VietinBank Securities said in its market prospects report released Thursday.
Public debt this year is expected to fall slightly from 58.4 percent of GDP last year to 58.3 percent this year, and another 0.5 percentage points in 2020. Inflation is likely to remain at 3.5 percent in 2019, the same level as the prior two years, and could fall to 3.2 percent in 2020, the report said.
However, average earnings per share (P/E) for stocks on the Ho Chi Minh Stock Exchange (HoSE), which the VN-Index represents, is expected to grow much more slowly by year-end compared to last year.
The current P/E on HoSE is 16.7 percent. This figure by 2019-end is projected to grow around 10.5 percent compared to the beginning of the year, down from 26.5 percent in 2018, according to VietinBank Securities.
According to VietinBank Securities, if global factors pick up, such as the U.S.-China trade war cooling down or the U.S. Federal Reserve cutting interest rates even further than expected, Vietnam’s stock market could see an even bigger breakthrough by year-end.
However, Phan Dung Khanh, investment consulting director at securities firm Maybank KimEng Vietnam, told VnExpress International that stock market movements depend heavily on capital flow, which tends to be irrational, instead of macro indicators.
Since the beginning of the year, the VN-Index has been growing steadily, but this was not a result of strong capital flowing into the market but companies issuing more shares, so market capitalization naturally increases, he said.
“This growth is unstable, because there is no positive capital flow acting as a buffer. So when some investors begin selling, the market can react strongly and follow suit. This can be seen in the last few weeks, when liquidity surged and the market plummeted,” Khanh added.
Between early September and October-end, the VN-Index had been edging steadily towards the 1,000 points from around 970 points on September 9, but liquidity rarely exceeded VND3 trillion ($129 million) a day for order-matching transactions.
But in the last two weeks, the VN-Index had surpassed the 1,000 point mark, peaked at over 1,024 points on November 6, then dropped nine sessions to close at 987.89 Thursday afternoon, while liquidity rose as high as VND4 trillion ($172.36 million) per day.
The VN-Index fell 10.11 points, or 1.02 percent to 977.78 Friday afternoon, its lowest point since September 12, and its third consecutive losing session.
Blue-chips on the VN30, which represents the thirty biggest market listed market cap companies in Vietnam, fell 0.66 percent.
The HNX-Index for shares on the Hanoi Stock Exchange, Vietnam’s second main bourse, fell 1.58 percent, and the UPCoM-Index for the Unlisted Public Companies Market fell 0.3 percent.
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