The Ho Chi Minh Stock Exchange (HoSE) started October in an interesting place. The State Bank of Vietnam (SBV) was in the midst of a series of treasury bill issues with billions of dong being pulled from the market every day. Uncertainty over the impact this would have on the market and what the SBV might do next, saw investors become extremely cautious–on October 5, foreign traders bought just US$5 million worth of stocks, the lowest investment in the stock market in a single day for foreign investors since August of 2020, which was right around the middle of the COVID-19 pandemic.

This, however, was not the only anomaly.

It was also reported early in October that deposits at banks had reached their highest level ever in July. This was despite interest rates decreasing at pace. Observers theorised that risk-averse Vietnamese were eschewing stocks and bonds in favor of the relative safety of Vietnam’s banks and, of course, gold. In fact, the price of gold in Vietnam was almost US$600 higher than the world gold price in the middle of October.

But trading aside, the HoSE was also facing an existential dilemma. Assessments from MSCI and FTSE Russell earlier in the year had identified several factors preventing the market from an upgrade from frontier to emerging. In October, Can Van Luc, chief economist at Hanoi-based BIDV bank added his voice to the calls for reform to meet said upgrade requirements.

These calls were not unanswered either with Reuters reporting toward the end of the month that HoSE decision-makers were considering allowing local brokers to vouch for foreign traders. This was to appease FTSE which had said that making brokers wait for confirmation a client had the funds to pay for a trade before the trade could be executed was holding Vietnam’s stock market back. Removing this stipulation would bring Vietnam one step closer to emerging market status and likely billions of dollars of additional investment.

For some additional context, foreign traders in 2023 seemed to be somewhat losing interest the HoSE. In the first nine months of the year, they had withdrawn VND 11.46 trillion (US$467 million) from the market–a sizable chunk of change whichever way you cut it. In this sense, there was a sense of urgency to wooing foreign traders back and reform was a low-cost and relatively easy option.

That is not to say that the market was in a particularly bad place. For the better part of the first half of October the VN-Index had been slowly rising. The uncertainty that had spooked investors at the start of the month had abated and state media was quick (a little too quick) to predict that, in the week beginning October 16, the index would continue its upward trajectory, though with a distinct dearth of supporting evidence.

What actually happened, however, was almost entirely the opposite.

On Monday the VN-Index lost 13 points, on Tuesday 20 points, on Wednesday 18 points, and on Thursday a whopping 33.8 points. Things didn’t turn around for the Hose until the end of the week when it managed to claw back 20.18 points on the Friday to finish out the week 64.62 points lower than it had been at the start.

That said, the event that really got investors talking was when on October 26 the VN-Index stumbled coming out of the gates and fell by over 40 points in a matter of minutes. When the dust had cleared it became apparent that Vingroup had refinanced about US$250 million worth of loans and this had spooked investors. It was speculated that they had read the move as a sign that Vingroup’s financial status was questionable.

That said, there was also the suggestion that the drop had actually been caused by ‘tricks and rumours’ whereby nefarious characters were trying to manipulate the market. Note that there was little evidence to support this assertion, and against the backdrop of Vingroup’s Vinfast venture, which is losing money hand over fist and struggling to gain traction in any of its target markets, it seems that these ‘rumours’ were not without some justification.

Moving forward, at the end of the month, as Halloween revellers prepared their tricks and treats and jack-o-lanterns on October 31, the HoSE was closing the day down 14.21 points. This saw the popular index finish October at 1,028.19 or 10.91 percent lower than it was at the start of the month–October was not great for the local market. 

That said, the steps taken toward overcoming Vietnam’s barriers to being designated by MSCI and FTSE as an emerging market show promise. Whereas the challenges the local bourse faced in October are only temporary, reforms to the HoSE regulations have the potential to have a lasting impact on Vietnam’s stock market and economy more broadly.

VN-Index October 2023