Banking & Finance

Though Vietnam’s stock market has recently seen a decline in share prices of around 10 per cent, HSBC’s Global Economic Research Report states that now is not the time to sell as “the profit is still there.” Notably, the average daily trading value in 2020 was $430 million, a record high, then in May 2021 passed $1 billion. The number of new investors also rose, with about 500,000 new accounts opened in the first five months of the year, up 22 per cent year-on-year. Vietnam’s main drivers are its status as a new emerging market and high market liquidity. Other supporting factors include effective measures to control the Covid-19 pandemic and loosen monetary policies.

Businesses have incurred sharp increases in production costs since the outbreak of Covid-19 last year, such as higher prices for non-fuel goods, fuel, land rentals, and sea freight. Though average CPI increased just 1.47 per cent in the first half of the year - the lowest rise since 2016 - inflationary trends may increase in the closing months of the year. Disruptions in the supply chain due to improper pandemic prevention measures will also cause prices to increase sharply over the remainder of 2021.

Since Covid-19 first broke out, central banks around the world have loosened monetary policies to support economic recovery. Changes are now being made, however, to deal with rising prices and inflation. In Vietnam, meanwhile, the CPI is still low and it will be difficult to reach GDP growth targets, so it is likely that the State Bank of Vietnam will maintain its loosened monetary policy as it is effective in supporting economic recovery and has not caused any significant concerns about inflation.

The State Bank of Vietnam (SBV) has proposed eight solutions for the second half of 2021 as Covid-19 continues to make its presence felt. Notable points include conducting flexible monetary policy, maintaining liquidity in the banking system, synchronizing monetary, credit, and liquidity solutions to support economic recovery, managing interest rates in line with the macro balance, inflation, and market movements to reduce customer repayments, insisting businesses use telecommunications accounts to pay for goods and services of small value (Mobile-Money), and implementing the plan for the digital transformation of the banking sector to 2025 with an orientation to 2030.

Vietnam’s stock market is one of the fastest growing in the world, but the high proportion of stocks in major industries makes retail investors cautious. The banking sector accounts for 34.55 per cent and real estate 21.39 per cent, for a total of 55.94 per cent; a ratio rarely found elsewhere. To enhance the durability of the market, it is important to diversify sectors. Production and business sectors associated with science and technology should be among those driving the market.

Rising prices have given fertilizer stocks higher valuations and greater appeal.