Stock market remains attractive to retail investors

Despite the remarkable surge in gold prices and the gradual increase in deposit interest rates, the stock market continues to stand out as an appealing investment channel.

Despite the remarkable surge in gold prices and the gradual increase in deposit interest rates, the stock market continues to stand out as an appealing investment channel.

Stocks remain attractive, with 106,000 new accounts opened in June, and a total of 751,000 new accounts opened so far this year.

Cash flow into the stock market surged over this period, with a 37 per cent increase in average daily trading value compared to the entire year of 2023, reaching VNĐ23.3 trillion (US$916.6 million).

Retail investors continued to drive market demand, while foreign and institutional investors showed fluctuating trends.

Last month, retail investors made net purchases of VNĐ15.58 trillion, totalling VNĐ55.95 trillion in the first six months. Foreign investors, however, continued their net selling with a total of over VNĐ52 trillion.

Đinh Đức Minh, Investment Director at VinaCapital Fund Management, said that the Vietnamese stock market had shown better growth compared to other ASEAN markets and MSCI indices of emerging and frontier markets.

From the beginning of the year, until the first week of July, the benchmark VN-Index recorded a 13.6 per cent increase in local currency and an 8.4 per cent gain when converted to US dollars.

However, it was important to note that the overall market growth, although surpassing deposit interest rates, didn't fully reflect its attractiveness. This was due to the significant divergence among stock groups.

While some stocks experienced declines in the first six months of the year, there were numerous others that doubled or even tripled in value.

Many open-end funds listed on exchanges significantly outperformed the 10.3 per cent growth of the VN-Index in the first half of the year.

The VinaCapital Modern Economy Equity Fund (VMEEF) led with an impressive 30.2 per cent growth, followed by the SSI Sustainable Competitive Advantage Fund (SCA) at over 27 per cent, the Dragon Capital Dynamic Securities Fund (DCDS) at 21.9 per cent and the Bảo Việt Prospect Equity Open-Ended Fund (BVPF) at 20.4 per cent.

These funds attract capital from retail investors and are managed by experts with publicly disclosed portfolios and objectives.

"This upbeat outlook is driven by the purchasing power of domestic investors, who account for 85-90 per cent of market transactions, with expectations of a positive economic recovery in 2024-2025 and interest rates that, although slightly higher than last year, remain relatively attractive for stock investments,” Minh told the Saigon Times.

Similarly, the analysis team at Yuanta Securities Vietnam believes that stocks offer more appeal compared to other investment channels, despite the upward trend in savings interest rates. This is due to the relatively low valuation of large-cap stock groups and the VN-Index.

Bright prospective

As of July 11, the market had shown signs of profit-taking after a series of consecutive gains. The VN-Index is currently trading within the range of 1,280-1,290 points, having reached the milestone of 1,300 points in June.

This key marker sparked expectations among investors for the Vietnamese stock market to continue its upward trajectory and retest previous highs. The bullish trend is taking inspiration from the US stock market's continuous record-breaking performance, driven by the technology sector.

In Việt Nam, the banking and real estate sectors, which collectively represent 51 per cent of the market capitalisation, have experienced sideways movement and encountered specific challenges.

The recent market trends are viewed as a cooling-off phase following a period of significant growth, particularly in the first quarter. However, the overall sentiment remains positive and many analysts stay optimistic about the VN-Index's prospects.

Mirae Asset's analysis team notes that buying pressure is gradually prevailing, with significant selling pressure being well absorbed.

The average daily trading value has increased by 5 per cent, while the total trading volume for the month has decreased by 8.7 per cent.

Maybank Securities' analysts expect short-term pressure from foreign investors, exchange rates and interest rate hikes, but anticipate a gradual reduction in the second half of 2024.

Regulatory changes on pre-funding requirements also contribute to market optimism.

Minh from VinaCapital said he sees a positive outlook on the stock market, considering the rapid economic recovery surpassing expectations and the potential for listed companies to achieve favourable business outcomes throughout the year.

VinaCapital's portfolio, which represents approximately 90 per cent of the market capitalisation, is projected to experience profit growth of around 20 per cent for the year.

While the stock market might still face influences from exchange rate and interest rate pressures, these pressures are expected to gradually subside in the near future, Minh added.