Fed raises interest rates to a record, what will Vietnamese stocks be like?

Cautious sentiment enveloped the market in the context that Vietnam’s stock market was quite sensitive to external fluctuations, especially the news that the Fed continued to raise record interest rates.

Since bottoming in mid-July, the VN-Index has consolidated the recovering trend and increased by 6.3% in August with a positive change in liquidity with average trading value on 3 exchanges. reached VND 18,541 billion, up 35.6% compared to the previous month.

However, entering the first trading sessions of September, market liquidity tended to decrease and there was a time when the liquidity on HoSE floor reached the lowest level in 2 months at session 21/9 with 9,774 billion dong. This shows that, shortening the payment time to T+2 from August 29 and for odd lot transactions from September 12 does not seem to have created the motivation to stimulate cash flow again when investor sentiment is still low. very cautious in the context of unpredictable market movements.

Closing the session on September 21, VN-Index stopped at 1,210.55 points with many industry groups in the red and the number of stocks with declines dominated the whole market. The developments are more unpredictable when on the night of September 21, the US Federal Reserve (Fed) continued to raise interest rates to a record to cool down inflation in the US. The decision also marked the Fed’s most aggressive tightening of policy since the 1980s to curb inflation.

Talking to Nhadautu.vn, Mr. Tran Duc Anh – Director of Macro & Market Strategy of KB Securities Vietnam (KBSV) said that, first, the Fed’s interest rate hike will affect home sentiment. investment because in the past 2 years, Vietnamese stocks are often correlated with global stocks.

The tightening of monetary policy will affect the exchange rate, causing the USD to tend to increase strongly, increasing the pressure on the State Bank to control the exchange rate. Failure to stabilize the exchange rate and keep investors’ confidence in the local currency will result in net capital outflows and increased import inflation, putting pressure on domestic inflation.

“With its position as the world’s leading economy, if the Fed tightens policy too quickly, it will have spillover effects on other economies. In the context of Vietnam’s large economic openness, developments on It also affects the growth of the domestic economy,” said Mr. Tran Duc Anh.

According to expert KBSV, in today’s session, the domestic stock market will correct when investor sentiment is affected by the news that the Fed will raise interest rates. In the coming time, it is expected that the good third-quarter business results will be the fulcrum for the market to recover.

According to Mr. Tran Thang Long, Director of Analysis of BIDV Securities Company, in general, the Fed’s move to raise interest rates will affect global stocks, when interest rates rise, financial asset valuations will go down.

“In terms of valuation, the Fed’s decision to raise interest rates for the third time in a row at 0.75% could cause US stocks to drop by 3%, while for the Vietnamese market, the volatility depends on the degree of similarity. mandarin,” said Mr. Tran Thang Long.

For his part, Mr. Nguyen Hong Diep, General Director of S-Talk Investment Consulting Joint Stock Company, said that in the short term, Vietnamese stocks will be very little affected by the Fed’s move. As for the medium and long term, there are many more factors to consider.

Firstly, Vietnam’s macro is currently relatively bright when inflation is well controlled, the exchange rate is not too hot and interest rates only increase locally.

Second, the world in which the United States stands out is facing challenges on many issues, including maintaining high interest rates, but this is no longer a new issue that surprises investors. The USD after a record increase is showing signs of going down. The global-oriented index DJ, although in the correction phase, is also approaching the bottom support zone.

Third, in terms of valuation, Vietnam’s securities are at the cheapest level within 5 years when the average P/E of the whole market is around 13. With the growth of profits of many industry groups, especially the banking line of about approx. 25% in 2022 will bring the forward P/E ratio to 10.

Finally, the weak cash flow shows that the demand is not strong enough, but in other respects, there is not enough stock to “deeply push”. The current context is different from the time when VN-Index peaked at 1,536 and went downhill without stopping. At that time, high liquidity is also a “double-edged sword” in case the sell-off occurs.

“In short, the Fed has given a multi-dimensional message. How to believe and argue will affect each person’s investment decision,” emphasized Mr. Nguyen Hong Diep.

In recent reports, most securities companies also gave a cautious view before the Fed’s move.

Specifically, Yuanta Vietnam believes that the market will continue to struggle and fluctuate strongly due to the influence of the Fed meeting. At the same time, the short-term risk of the general market is still high so the downward pressure is still very large, but the level of 1,200 points of the VN-Index is a strong support level. In the positive scenario, if the main index continues to fluctuate in the range of 1,200–1,213 points, the short-term risk may gradually decrease. In addition, the short-term sentiment indicator continued to drop slightly, showing that investor sentiment has not improved.

Similarly, TPS believes that VN-Index will continue to fluctuate above the important support level of 1,200 points and still cannot break out of here. Along with that, the liquidity dropped once again and fell to the lowest level this year, proving investors’ caution before the Fed meeting. This shows that the risk of the market is still high.

Meanwhile, TVSI assesses that at present, the correlation between expected return and risk is still not attractive enough for short-term investors, so despite being optimistic about the market outlook after the Fed’s decision, TVSI still advises Short-term investors should be extra patient.

Similarly, according to SGI Capital, the period of September and October 2022 may be a strong test for the stock market against risks coming from the global financial market when the Fed accelerates to attract money. However, SGI Capital believes that the most stressful and unexpected period of exchange rate and interest rate pressure may be gradually passing. The State Bank of Vietnam will have more room to operate from the end of the fourth quarter when the pace of monetary tightening slows down globally. At that time, market liquidity is expected to improve more markedly and the market will gradually stabilize.

According to Khanh An/Investors