Market scenarios for the second half

Quang Son

Since April, Vietnam’s stock market has seen increased liquidity. However, by the end of the year, it is expected to experience the negative effects of the Covid-19 pandemic and be dampened by the weaker results of businesses.

macro indicators

Although many countries are still struggling with the Covid-19 pandemic, Vietnam’s macro economy performed relatively positively in the first half of the year, creating the foundation for the stock market to advance. Manufacturing PMI index continued to increase sharply from 42.7 points in May to 51.1 points in June 2020, according to research conducted by BIDV Securities Company.

A PMI above 50 indicates an expansion in the manufacturing sector. The Index of Industrial Production (IIP) rose 7.0 percent y-o-y in June (after a 0.4 percent y-o-y decline in May). The industrial sector’s recovery was driven by a strong rebound in electronics production.

According to VNDirect Securities Corporation, although GDP has risen at the slowest pace in a decade, it still surpassed the company’s expectations as the service sector made a fasterthan-expected recovery, particularly hospitality services.

VNDirect expects Vietnam’s GDP growth to strongly bounce back in the second half of this year as the post-pandemic reopening of major economies such as the US and the EU could lift external demand for Vietnam’s products. The Vietnamese government could also accelerate public investment and ease monetary policy further to support the economy.

Market second outlook half in the

Based on the evaluation of domestic and foreign impact factors, as well as using the weighting methodology from financial institutions' analysis, BSC forecasts that the VN-Index could fluctuate around 832 ± 70 points, with a focus area of 795 to 900 points in the last six months of 2020. Among two following reference scenarios, BSC considered the positive scenario the highest possibility.

Specifically, in a positive case, VNIndex created a consolidated platform

around 800 points and closed around 900 points by the end of the year. After the differentiation in July, the market saw strong fluctuation thanks to speculative cash flow and the return of foreign capital flows. In a negative case, VN-Index may drop below 800 points and see a negative fluctuation direction to check the short-term bottom at 650 points when there is much adverse information from the world as foreign investors push up net withdrawal.

Among stocks, BSC highly recommends stocks with improvements and positive outlook such as banking, retail, information technology and postal and telecommunications.

VNDirect's analyst estimates that in the second half of the year, the profitability of VN-Index listed businesses will decrease by 5-6 percent y-o-y. "VNIndex can maintain at the current level and might reach around 840-920 points by the end of 2020.”