Despite a stable macroeconomic environment and the high earnings growth of listed companies, Vietnam’s stock market has long been “undervalued” relative to other markets as it remains a frontier market, according to KB Securities. At a VIR seminar last week, attendees were told that the valuation gap will narrow on market reclassification, which is expected over the next 2-3 years and reflects the positive outlook of the market in the long run.

Tran Duc Anh, head of Macro and Strategy at KB Securities Vietnam assessed, “The dominant factor affecting local and global stock markets in the second half of 2022 is the risk of the US economic slowdown under the impact of inflation, interest rate rises, and the resistance of the US economy against aggressive rate hikes,” Anh noted at the seminar, themed on managing investments in a flexible environment.

“In the base-case scenario, given the low chance of US economic recession in the remainder of the year, Vietnam’s stock market will tend to rebound on positive business results of listed enterprises, thanks to better economic fundamentals like high GDP growth, consumption recovery, export growth, and overseas investment attraction, among others. However, the stock market may experience a steady upswing with alternating ups and downs as market sentiment may sour on rising macro risks,” Anh said.

Other factors that may negatively influence the stock market include domestic inflation, especially in Q3 and Q4, potential risks from the corporate bond market, the central bank’s monetary policy, the pandemic policy in China, the conflict in Ukraine, and oil price movements.

In the first half of 2022, the S&P 500 index saw its worst decline since 1970, and the Dow Jones experienced its greatest decrease since 1962. In the second quarter of this year, the VN-Index for the domestic market decreased by more than 20 per cent from its peak level. Apart from stocks, other investment channels including cryptocurrencies, gold, bonds, and real estate saw significant price and liquidity decreases.

According to economist Le Xuan Nghia, in addition to inflation, other elements are exerted more pressure on the economy of Vietnam, such as the market downturn, decline and limitation of investment channels, including corporate bonds, or real estate.

And Le Trong Minh, VIR’s editor-in-chief, emphasised that after suffering financial losses, many investors have shifted their attention back to more conventional investment vehicles, such as bank savings accounts.

“New investment channels such as digital assets, digital currency, blockchain, and non-fungible tokens (NFTs) have calmed down, but transaction volume is still significantly higher than in the past,” Minh said. “The current dip is only a correction from the market’s peak, but long-term investment channels are still doing extremely well in Vietnam and there is always an abundance of investment possibilities.”

In the same vein, Thai Viet Dung, director of Exness Vietnam, agreed that innovative business and investment models, infused with high technology, are gaining stronger traction as they offer more lucrative value compared to traditional approaches.

“However, as the Fed could raise interest rates by as much as a full percentage point later this month, US investors might hesitate to pour funds into other emerging economies,” Dung said. “Furthermore, earnings and stock values are adversely affected in the case of interest rate hikes. Even mortgages, car loans and business loans have become more expensive, slowing down cash flows.”

Because of the increased interest rates, there is a considerable drive for money to flow into the US from other countries, while countries whose economies are sustained by capital denominated in US dollars run the danger of experiencing both capital pumping and capital flight, Dung added. “We anticipate that the US dollar will continue to enjoy the benefits associated with its position as a safe haven for international investors.”

Forward-thinking investors, as a result, should explore other investment methods to hedge risks and reap better profits, such as CFD (contract for differences) trading. “Choosing a reliable CFD broker with top-notch infrastructure and an international legally-approved platform would take you a long way,” Dung explained.

Le Van Duong, partner at Indochine Counsel, also stated that an increasing number of investors are attempting to seek financial rewards by diversifying their portfolios, preferably a mix of traditional and new investment approaches.

“I would highly recommend everyone should thoroughly study their field of interest, with a solid legal background, to avoid potential risks arising. With the emerging financial products inspired by technology, investors should be well prepared with up-to-date legal documents to protect their interests,” he shared. “Besides legal and financial due diligence, human resources are also important, particularly for tech startups.”

Duong of Indochine Counsel also added that a regulatory sandbox model is reportedly being examined to apply to crypto-enabled businesses in Vietnam.

William Do, CEO of Hobbit Investment, highlighted that some novel investment models have gained traction over the past few months, which in turn unlock vast potential for financiers with a forward-thinking mindset.

“For instance, the use of NFTs during the transactional phases of purchasing and selling physical real estate might be a very lucrative business endeavour for investors. Even though NFTs are relatively new, they have the potential to have an extensive and long-term influence on the value of a piece of land,” Do said. “This is particularly true as we approach a new era in which we will be selling houses that are backed by crypto-based mortgages.”