Steep hills ahead for investors

After a steep decline in the stock market in the second quarter of 2022, real estate prices have levelled off, virtual currencies have plummeted, gold has fluctuated wildly, corporate bonds have frozen up, and savings interest rates have risen but remain low, making it challenging for investors to decide where to put their money and hedge risks in Q2.

“As global inflation rises, the competition to raise interest rates is becoming more intense, and projections concerning stagflation in key economies are becoming more prevalent,” stated Phan Dung Khanh, director of Investment Strategy Advisory at Maybank Kim Eng Securities.

It is going to be extremely challenging for the equity market to move up again, he went on to say. “When there is a decline in the stock market, all sectors experience some kind of decline, whether small or significant. In light of this, looking for a sector that is growing when the stock market is falling is already fraught with a significant amount of danger.”

VNDIRECT analysts are also on the same page, noting that inflation is still at the top of the risk list.

“Even though the consumer price index (CPI) climbed modestly 2.44 per cent on-year in the first six months of 2022, inflation will accelerate in the latter half of this year, driven by both demand-pull and cost-push,” the brokerage wrote. “If oil prices are still elevated, the government would reduce the environmental tax rates for petroleum products. We expect an average CPI at 3.5 per cent for 2022, well below the guidance of about 4 per cent. Other macro risks include geopolitical crisis and China’s current pandemic strategy, both of which are casting a shadow over the global trade supply chain.”

VinaCapital’s economist Michael Kokalari noted that the Fed’s aggressive rate hikes, which exacerbated the already prevailing economic stresses caused by the Ukraine situation and China’s pandemic lockdowns, have weighed on stock prices across the globe, including in Vietnam.

However, Vietnam’s economy is much more resilient to global economic storms than in the past, largely because of policy decisions by the local government to balance economic growth and economic stability.

“The VN-Index may currently be selling off along with global stock markets, but the country’s economy is still in good shape, primarily because domestic consumption - which accounts for two-thirds of Vietnam GDP - is booming,” Kokalari said.

Consequently, the consensus expects the VN-Index’s earnings per share to grow by nearly 20 per cent this year, according to Bloomberg. “For that reason, we expect that to support a strong rebound in Vietnamese stock markets when the Fed eventually relents on its aggressive rate hikes. The same cannot be said for all emerging markets, however, especially those with current account deficits and huge USD-denominated debts,” Kokalari added.

According to Dragon Capital, the most appealing long-term investment channels are still securities, followed by real estate investment, corporate bonds, bank savings, and gold.

Nevertheless, as the State Bank of Vietnam maintains its control policy over real estate loans and corporate bond issuance, it is anticipated this segment would be challenging.

With house loan interest rates under rising pressure, the property market is projected to experience numerous obstacles, said Su Ngoc Khuong, senior investment director at Savills Vietnam. “Given this, investors face additional challenges in gaining access to funds. Additionally, since commercial banks have limited credit capacity associated with the property sector, their ability to provide loans to prospective homeowners is hindered,” he said.

Khanh of Maybank Kim Eng Securities believes the most lucrative route to invest so far this year has been savings, whereas the majority of other asset channels have seen losses. Many investors have gained a better understanding that investing is a serious profession as a result of the recent steep downturn in the stock market.

There are now new prospects for lucrative investment across a variety of platforms. According to Thai Viet Dung, representative of Exness, investors could gain an upper hand by placing their bets on new investment channels.

“These new investment channels include forex, cryptocurrencies, derivatives, and other financial instruments. However, selecting a lucrative channel and platforms to spend financial resources on may be difficult since each investment channel has a unique set of benefits and drawbacks, and it can be challenging to determine which will provide the highest return,” he said.