Investors made aware of uneven recovery risks

Tran Quoc Phuong, deputy Minister of Planning and Investment

This year continues to be one of many unpredictable movements around the world. These uncertainties not only threaten regional and international security, and maritime safety, but also affect the supply chain of goods, food security, and global energy security. This has led to a slower and uneven recovery of the global economy, with financial and currency markets, and global investment flows being strongly affected.

However, Vietnam’s economy continues its recovery trend, achieving many important and encouraging results. There are many favourable factors, both external and internal, so we can expect a positive recovery trend of the economy.

Despite positive recovery, Vietnam’s economy is still struggling with some difficulties, due to unpredictable developments in the world and regional situation as well as internal problems of the economy.

The Ministry of Planning and Investment will continue to research, advise, and propose that the government improves institutions and develops policies to promote growth, maintain macroeconomic stability, and control inflation, ensuring major balances.

To reach the 2024 plan, the economy should continue to strongly promote and renew traditional drivers of investment, consumption, and export; supplement and take advantage of opportunities from new growth drivers and new economic models, such as digital transformation, green transition, circular economy, and the sharing economy, or new industries like chip production, semiconductors, and renewable energy.

Promoting disbursement of public investment and implementing strategic infrastructure projects is also an important solution.

Do Thanh Tung, deputy director of Analysis Rong Viet Securities Corporation

Since the start of 2024, the government has pronounced its top priority of propelling economic growth through the introduction of expanded monetary and fiscal policies.

Along with this, the State Bank of Vietnam (SBV) has granted a credit limit to the banking sector at 15 per cent, which is an unprecedented move in an attempt to bolster economic growth.

The interest rates had taken a dip in the first quarter, which serves as a perfect catalyst to entice capital flow to the stock market, helping to re-evaluate the market in the context listed companies eye profit rebound. We see that market valuations in general are moving towards its 10-year average, based on the catalysts of low interest rates as well as recovering earnings growth.

Another variable that could impact the market outlook for the rest of this year and into 2025 is closely related to the market upgrade story. Preparations for the upgrade have been well underway, despite recent delays in the rollout of the new trading system.

With these dynamics, we are confident that the market will maintain its uptrend until the end of the year, but the path is not completely smooth as there will be adjustment periods and there exist diverse variables that we need to monitor, such as the interest rates.

Phan Duc Hieu, standing member National Assembly Economic Committee

The government is taking a completely different approach to providing information and regulating socioeconomic development. In 2023, priority was given to macroeconomic control, combining proper fiscal policy and monetary policy. In 2024, top priority is given to promoting economic growth.

Regarding institutions, the government in Vietnam is implementing policies very drastically, controlling the quality of documents from the promulgation stage as well as strengthening coordination among state agencies. Over the past year, some important laws have been issued, including on housing, real estate, land, and credit institutions.

Businesses should carefully research and formulate suitable strategies in line with these four important laws, which can restructure the market for relevant production and business industries.

My advice for businesses is to closely follow the regulatory changes. Thus, they can provide feedback, make adjustments, and formulate scenarios from the drafting stage until the enforcement stage.

Truong Van Phuoc, former chairman National Financial Supervisory Commission

There are some uncertain variables in the global economy in the coming time. While international media predicts that the US Federal Reserve will cut its key interest rate in September. I think it is likely to do so in July. Another variable is the 2024 US elections in November.

To adapt flexibly to uncertainties, Vietnam needs more drastic changes in its policy. For instance, the country’s gold prices were VND20 million ($785) higher than the global gold prices. With the government’s intervention, Vietnam has narrowed the gap to around VND4 million ($160). It is clear that Vietnam posts good macroeconomic indicators, but we don’t have space to adapt to turbulence.

Take relief measures, for example. Vietnam has issued different relief measures to support the recovery of its businesses and citizens. However, compared with developed countries, it takes longer for Vietnamese businesses and citizens to receive subsidies. If we can close regulatory loopholes, Vietnam should post higher economic growth, while the market should see further enhancements.

Nguyen Sang Loc, director of Operations Dragon Capital Vietfund Management

All central banks globally are at the end of their interest rate hike cycles because, after a prolonged battle with inflation, the next priority is maintaining employment levels. Major global economies have shown signs of slowing, as evidenced by the Bank of Canada cutting rates by 25 basis points on June 5, and the European Central Bank is expected to follow suit.

In Vietnam, we use interest rate tools to support the exchange rate issues, indicating that Vietnam will return to that cycle in the future.

Beyond macroeconomics, the most critical issue remains corporate profits. Since Q3 last year, Dragon Capital has been monitoring less common indicators such as electricity consumption to observe recovery in production, tracking the flow of goods through Vietnamese ports, and examining retail sales and spending data to see growth in both value and volume. This indicates that the recovery began gradually from late Q3 last year, although the broader context remained challenging. Experts will agree that Vietnam’s economy is in the early stages of recovery.

Nguyen Ba Huy, CFA - Portfolio manager at SSI Asset Management (SSIAM)

The government has implemented rational measures to address interest rate differentials, ensuring that exchange rate issues impacting investor decisions will become insignificant in the near future. Policy-wise, we have increasingly focused on growth, with banks utilising their credit quotas early in the year.

Interest rates are not expected to rise significantly or tighten. Any increase will be minimal. A low interest rate environment will continue to drive economic growth, potentially leading to the return of domestic capital flows.

Interest rates will play a crucial role, directly impacting the stock market, capital markets, and business decisions. Should geopolitical factors arise, inflation is not anticipated to be a significant concern in Vietnam.

In the near future, numerous industries will have the basis to grow and expand their operations. Key factors for the stock market in the coming period will include a low production environment, stable macroeconomic conditions, and recovering business growth.