This is a brief rundown on how Vietnam’s stock market has been performing / what’s expected from the market moving forward. With comments from VinaCapital Chief Economist Michael Kokalari and Host of Ho Chi Minh City Securities Emerging Asia podcast, Hugo Bosch.
A month into the war in Iran, and pump prices for Vietnam’s most common consumer fuel, RON95, are currently up 22 percent, after government subsidies, over the end of February, after a peak of 54.23 percent on March 24.
This rapid rise in fuel prices weighed heavily on the local bourse throughout March, with the VN-Index down just under 11 percent at the end of the month.
It is, however, down just 6 percent, notes Hugo Bosch, host of Ho Chi Minh City Securities’ Emerging Asia podcast, noting it could be worse.
“It’s not good, but neither is it absolutely terrible, such as, you know, 2022 disaster style,” he told the-shiv.
Indeed, in 2022, a jump in economic activity post COVID-19, coupled with the start of the War in Ukraine, kicked off a global energy crisis that led to long lines at petrol stations and fuel shortages. This saw the VN-Index lose about a third of its value across the course of the year.
This time around, however, at least so far, anecdotally, it doesn’t seem quite so bad, Bosch says.
“Everyone’s hopping on their bikes and driving around as usual. It certainly doesn’t appear that way in my corner of the city.”
In air transport, however, he points out it’s a slightly different story, with airlines relying heavily on imported jet fuel, which is becoming scarce.
Of note, Vietnam Airlines (HVN) announced in March that it would be cancelling about 10 to 20 percent of its flights a month, with Vietjet (VJC) expecting to reduce its flights by about a fifth.
Both stock prices were down at the end of the month, Vietnam Airlines by 22.8 percent, and Vietjet by about 11 percent.
“It’s going to certainly be a squeeze for airlines and the aviation sector as a whole,” Bosch said.
But whereas the aviation sector downsides are broad, in energy, he notes, it’s a little more nuanced.
The companies that are importing oil are likely to struggle, but downstream firms in exploration and drilling are likely to see a boost in support, he said.
“So it really depends on which part of the oil and gas sector you’re in.”
Notably, in March, most energy stocks were down, with the VNAllShare Energy Sector Index (VNENE) recording a decline of 11.69 percent.
Foreign traders, however, seemed unperturbed, buying into the dip with PetroVietnam Drilling and Well Services Corporation (PVD), Binh Son Refining and Petrochemical JSC (BSR), and Petrolimex Group JSC (PLX), seeing their foreign ownership increase by 2.75 percent, .54 percent, and 19.61 percent, respectively.
As for his outlook for the market moving forward, Bosch was relatively circumspect.
“I’m, I think, relatively sanguine about the crisis,” he said.
For contrast, VinaCaptail Chief Economist, Michael Kokalari, in an Economist’s Note published March 31, was much more specific.
“We believe there is an 80 percent chance the war will wind down within 2–3 weeks,” the note reads, though Kokalari told the-shiv this number was “pulled out of the air”, extending from a belief that anything longer would be too much for the Trump administration to bear.
That aside, Kokalari noted that higher savings interest rates may be starting to encourage domestic investors to exit the market.
“Normally in Vietnam, the 7 to 8 percent level of one-year deposit rates is the kind of level where people start to take money out of the stock market,” he said.
He did also note, however, that there seems to be some pressure on banks to keep interest rates below said threshold.
“Last week… in our understanding, they called the banks and said ‘hey, can you get this back under 8 percent’,” he said.
Incidentally, Vietnam’s four largest state-controlled commercial banks all saw their share prices fall in March, with Vietcombank down 10.48 percent, VietinBank down 9.54 percent, BIDV down 17.75 percent, and Agribank down 11.98 percent.
This, however, reflects more than just the direct impacts of the oil supply shock, but also second and third-order impacts, too.
The local currency, in particular, has come under increasing strain with the State Bank of Vietnam reportedly returning to selling US dollars on forward contracts, and inflation in March coming in at 4.65 percent, above the state bank’s upper limit of 4.5 percent.
Kokalari is also forecasting a 1.5 percent hit to GDP growth and expecting inflation to hit 5.5 percent, based on the aforementioned 2-3 week timeline, of which just over a week and a half remains.
He was, however, still upbeat about the prospects for the market, saying that when oil does start flowing again, he expects Vietnam’s economy to return to the strong growth it has seen in the past.
“There’s going to be an enormous surge in all stock markets, not just Vietnam’s; there’s going to be a huge, you know, rebound rally,” he said.
Source materials
Hugo Bosch: Video / Audio / Transcript
Michael Kokalari: Video / Audio / Transcript