[NEWS] - Stocks are still the most attractive investment channel

Experts believe that the current stock market is still in a stable growth trend based on analysis of the market’s constituent factors. However, the growth will not be too strong and will be similar to the economic indicators.

Stocks are still the most attractive

At the seminar "Market Recovery - New Opportunities for Businesses" recently organized by the Securities Economics Magazine, from the perspective of a securities company, Ms. Nguyen Thu Hang, General Director of Securities Company VIG pointed out many positive signs of the economy such as the August PMI index reaching above 50 points for the first time in the past 6 months; Export and import activities also have positive developments; Public investment disbursement activities are also promoted...

“With such a bright economic picture and recovery prospects, the stock market has also had very positive developments, reflected in scores, number of accounts as well as market liquidity. Thereby reflecting investors’ optimistic economic expectations" - Ms. Hang assessed.

Accordingly, although the VN-Index has not returned to its peak, many stocks have doubled, tripled in price, and even exceeded the peak. According to Ms. Hang, although in the short term, stocks that have increased in price will be at risk when the growth rate of profits and revenue of businesses has not kept up with the pace of price increase, in the long term, the market prospect is still very good.

Ms. Hang further analyzed, that in recent times the Government has continuously introduced measures to support the economy, including account and monetary policies and policies to support the real estate market and real estate channels. Real estate still has many difficulties related to capital, product structure, and output, so it will take more time for this channel to recover. Meanwhile, the gold channel, which is picky about investors, has low liquidity and unpredictable price fluctuations. The savings channel is also less attractive because deposit interest rates have recently decreased. Therefore, stocks are still the most attractive investment channel today and this attractiveness will continue to be maintained in the future.

Will there be a sudden break?

Mr. Nguyen Hong Diep, General Director of VICK Joint Stock Company, sees the stock market as being made up of three factors: policy, internal value of the market, and cash flow. To answer the question of whether any unexpected disruptions affect the market’s prospects, Mr. Diep analyzed in depth the three factors that make up the market above.

Accordingly, the possibility of a disruption in cash flow is very difficult, because currently, the remaining investment channels are very difficult, and even have a greater level of risk than stocks. Current signs show that money is still ready to wait for the opportunity to participate in the market. Regarding intrinsic value, although the market is not too cheap, it is still attractive with the ability to increase EPS (earnings per share) very impressively. Signs of the economy also show that businesses are on the road to recovery.

Thus, there is only one big question related to policy issues. Currently, the exchange rate is under considerable pressure and to cool down the exchange rate, the State Bank (SBV) has used the professional measure of issuing about 70,000 billion VND of T-bills on the open market operation channel in the last 5 sessions. This. The market is currently worried that if this net withdrawal does not cause the exchange rate to cool down, will the story of increasing interest rates happen, and how this will impact the stock market?

From his perspective and research after discussing with many market members, Mr. Nguyen Hong Diep believes that with the current low credit growth rate, the probability of the State Bank of Vietnam increasing interest rates is high. in 2023 and the first half of 2024 will be very low. Therefore, this factor will not hurt the market.

Besides, in terms of time, the market adjustment in recent sessions is suitable for a bullish cycle of the market. In terms of scores, the market currently still maintains the nearest support level of 1,120 points. Accordingly, if the macro situation is good, the money-sucking stops and the exchange rate becomes more stable, the stock market will immediately react positively again.

Based on the above analysis, Mr. Diep affirmed that the market will continue to maintain a growth trend from now until the end of 2023 and may last until the first half of 2024.

However, Mr. Diep also pointed out that credit growth is currently very low. This year’s credit growth target at 14% but after 9 months it has only reached 5.6% which is a very low number, so the ability to achieve this target is very difficult. This shows that the economy’s capital absorption capacity is currently very weak and also shows that the stock market is unlikely to grow as strongly as in 2020 and 2021. "We must soberly recognize that we need to accept and receive the market’s intrinsic value at around 1,200-1,250 points. The recent adjustments are very normal, but the possibility of strong growth to achieve more impressive numbers is very difficult. We should expect that in 2023 everything will be more stable and will be similar to the economic indicators" - Mr. Nguyen Hong Diep commented.

In a recently released report, SSI Research stated that the SBV’s move to issue bills to adjust the short-term liquidity situation in the system is a common activity from central banks and is not synonymous with the SBV reversing monetary policy. The implementation of this bill issuance operation can also be considered positive, instead of the State Bank choosing to sell foreign currency from foreign exchange reserves. Through this operation, the State Bank can assess the level of liquidity in the system, and adjust interest rates in market 2 (interbank market) to balance exchange rate pressure and pressure. Minimize the impact on market interest rates 1.

Currently, based on data from July, August, and the first half of September, which has not shown a clear recovery, GDP growth in the third quarter of 2023 is estimated to be much lower than the Government’s forecast of about 6.8 %-7.4%. Credit growth was only 5.56% compared to the beginning of the year as of mid-September and from recent messages from the Government and SBV, SSI Research does not think that tightening monetary policy will happen soon. In addition, with the current global inflation situation, rising commodity prices can be a potential risk for other central banks around the world. However, for Vietnam, the abundant petroleum stabilization fund and gasoline price subsidies to control inflation still have a lot of room, at least in the next quarter.

Hoang Yen (Collection source)