The Vietnamese stock market has gone through nearly half of 2022 with turbulence and remarkable events, especially the Government's crackdown on illegal activities manipulating the market.

At the moment, the market is struggling as both liquidity and the benchmark index fall sharply. Experts said that monetary policy tightening from the US Federal Reserve (Fed), prolonged Russia-Ukraine conflict and China's zero COVID policy will indirectly affect the country's stock market.

Stock market crackdown

In the first half of 2022, many big business owners such as Do Thanh Nhan, Chairman of the Board of Louis Holdings Group and Le Anh Dung, President of Tan Hoang Minh Group, were arrested for illegal activities in the stock and corporate bond market.

These cases showed the determination of the Government on cleaning up the market.

The Government has carried out measures to promote the upgrade of the market during the 2024-25 period, including disclosing securities enterprises' proprietary trading data, issuing warnings on stocks with dramatic increases or declines, and changing the calculation method of VN30 futures contracts. The measures are expected to help the stock market increase liquidity and information transparency.

The crackdown is considered practical, resolving many chronic bottlenecks and strengthening the sustainability of the market.

Representatives of the World Bank (WB) and FTSE Russell have committed to further supporting Viet Nam to build a sustainable stock market, particularly via regular exchange and coordination in the market upgrade.

They made the commitment at a recent working session with the State Securities Commission (SSC), during which the sides discussed the actual situation, and efforts made to remove bottlenecks in support of the Vietnamese stock market’s status upgrade process.

WB and FTSE Russell representatives said they highly appreciate the efforts of local management agencies and market members in upgrading the market from a marginal to an emerging one. They also proposed some solutions for the improvement of the market toward the upgrade.

Minister of Finance Ho Duc Phoc said that the stock market has grown well, with a strong rise in the number of new accounts and the market's average liquidity. However, there were manipulation activities on the stock and derivative markets.

Many stocks were boosted without relation to business situations, while information disclosure obligations of public companies, listed firms and investors were not completely followed.

The Ministry of Finance is working on amending and supplementing Decree No. 153/2020/ND-CP on private offering and trading of corporate bonds in the domestic and international markets.

In recent years, the stock market has attracted attention from local citizens. They are retail investors, but play important roles in the development of the market. However, they are a vulnerable group when the stock market is manipulated.

Challenges ahead

Even though the number of new accounts is surging, the country's stock market is struggling.

Data from the Vietnam Security Depository (VSD) showed that in the first five months of this year, retail investors opened 1.38 million accounts, 2.5 times higher than last year. The amount was nearly equal to the number of new accounts for the whole of 2021, which was 1.53 million accounts.

As of the end of May, the total of accounts opened covered around 5.7 per cent of the population.

Therefore, the Government's target of 5 per cent of the population investing in the stock market by 2025 is completed three years early. The next target of the market development strategy by 2030 is 8 per cent.

But the market experienced a great tumble in May with the benchmark VN-Index temporarily setting the lowest of the year at 1,156.54 points, down more than 32 per cent from its peak on January 6 of 1,528.6 points.

In June, the market is still in negative territory as the liquidity drops and the VN-Index hovered around 1,200 points. The index ended Monday at 1,202.82 points.

Mirae Asset Securities Viet Nam said that supply chain disruptions, strict COVID-19 rules in China, prolonged Russia-Ukraine war, sanctions on Russia, interest rate hikes from major global central banks and slowing economic growth amid high inflation are causes of the downside.

In addition, the investigations of the violations on the local stock market and the tightening conditions to issue bonds also weighed on investors' sentiment.

Many experts and public companies said that the market will see fluctuations and new shocks or tread water with low liquidity. Accordingly, at the end of 2022, the VN-Index is expected to grow by under 10 per cent.

Meanwhile, Vietnam Report JSC said that despite a more cautious outlook for the stock market due to current challenges, there are still some positive factors.

In the second half of 2022, the growth of industries affected by the pandemic is expected to be positive compared to the low of 2021, while it is believed that the disbursement of public investment is also accelerated.

The 2 per cent interest rate support package provides more momentum for stock market growth in particular and economic growth in general, if it is implemented as planned. — VNS