(Tiểu luận) macroeconomics report topic price fluctuations in vietnam’s stockmarket from 2020 to 2023

Rationale The Vietnam stock market serves as a critical platform for businesses to raise capitalwhile providing investors with opportunities to buy and sell shares of listed companies.Ho

FOREIGN TRADE UNIVERSITY

SCHOOL OF ECONOMICS AND INTERNATIONAL BUSINESS

Table of contentIntroduction

2 How does the stock market operate?

3 Major Causes of Price Fluctuation in Stock Exchange

Research

1 2020-2021: Growth period

1.1 Actual situation and data analysis

1.2 Motivators

1.3 Impact of the stock market on economy in 2020 - 2021

2 2022: The year of volatility

2.1 Real situation and data analysis

2.2 Major influential factors

2.3 Impact of the stock market on economic growth

3 2023: The more stable year

3.1 Real situation and data analysis

3.2 Potential advantages and disadvantages suggested for 2023

Protective Mechanisms and Solutions for Price Volatility in Stock Market

1 Protective mechanisms for price volatility in stock market

2 Long-term solutions for price volatility in the stock market

2.1 Key tasks and solutions to speed up allocation and disbursement of public investment capital

2.2 Encourage more investors to participate in the stock market

2.3 Restore investors’ trusts in the stock market

Conclusion

References

1 Rationale

The Vietnam stock market serves as a critical platform for businesses to raise capitalwhile providing investors with opportunities to buy and sell shares of listed companies.However, like other financial markets, the stock market in Vietnam can experiencefluctuations due to various factors

Overview:

- The stock market in Vietnam experienced a sharp decline in 2020 due to the

COVID-19 pandemic; however, as the government introduced stimulus measures and thecountry's handling of the pandemic was successful, the market recovered

- In 2021, there were continued fluctuations due to the pandemic and inflationarypressures, but the market remained stable

- In 2022 and 2023, the market is expected to continue growing due to strong economicgrowth, new investment opportunities, and increasing foreign investment Overall, despite the potential for volatility, the Vietnam stock market presentsattractive opportunities for investors looking to capitalize on the country's dynamic economicgrowth

2 Research objectives

To analyze the impact of internal (company-specific) and external (macroeconomic)factors on the price movement of Vietnamese securities during the research period, this paperwill act as a report on the Vietnamese stock market to find out what is the driving forcebehind the development of this market in recent years (2020-2023)

3 Scope of the research

In general, this study focuses on analyzing price fluctuations in the Vietnamese stockmarket, specifically at HOSE (the largest and the most active stock exchange in VN), with thevariables that have affected it The study aims to provide a comprehensive understanding ofthe dynamics and performance of the HOSE stock market during this period

Theoretical framework

1 Key definitions

A stock market, also known as a stock exchange, is a venue to trade securities, such as bonds and shares (Finance Strategists)

A stock is a form of security that indicates the holder has proportionate ownership in the

issuing corporation and is sold predominantly on stock exchanges

A stock index is a collection of shares representing a sector, exchange, or economy A stock

index usually consists of a certain amount of the top shares from a specific exchange (IG)

2 How does the stock market operate?

- Functions:

The stock market is where stocks are bought and sold When a company decides to gopublic, it issues stocks in an initial public offering (IPO) Investors can then purchasecompany shares on the stock market, and investors can profit from buying and selling stocks

at the right time Investors benefit by exchanging their money for shares on the stock market

As companies put that money to work growing and expanding their businesses, investors reapthe benefits as their shares of stock become more valuable over time, leading to capital gains

In addition, companies pay dividends to their shareholders as their profits grow Theperformances of individual stocks vary widely over time but taken as a whole; the stockmarket has historically rewarded investors with average annual returns of around 10%,making it one of the most reliable ways of growing your money (Forbes advisor)

- Regulations:

The SSC (States Securities Commission of VN) regulates the stock market in VN SSC

regulations cover four main areas:

3 Major Causes of Price Fluctuation in Stock Exchange

Share prices generally go up and down because of supply and demand However, they’re also

influenced by these factors:

- Information: When trading in shares, buyers and sellers check the latest news on a

company or an industry Their perception of the information may differ, influencingtheir decision to buy or sell For instance, if a company announces plans to expandinternationally, the potential surge in profits may spark investors’ interest, and theshare price may soar

- The economy: The performance of a country's or region’s economy, most notably

gross domestic product (GDP) and interest rates, can impact share prices As the GDPrises, production-based industries attract more investment and demand for shares Ifinterest rates increase, companies have to shell out more money to borrow, causingprofit margins to shrink and shares to lose their appeal

- The company’s financial health: Listed companies are required to publish their

financial statements regularly The profit and loss they include can help shareholdersand investors make trading decisions If results presentations show positive figures,demand for shares could rise and affect their price

- Government’s role: Government has a powerful influence on stock prices, either by

increasing investment or reducing it When the government takes steps to increaseinvestment, the share price goes higher, while when it discourages an industry, theshare price falls and people leave the industry

- External events: Impressions about a company’s performance can weigh heavily on

the demand for its shares Non-financial events like wars, pandemics, and naturaldisasters give investors uncertainty about risks to the capital invested in thecompanies and industries they affect (Santander)

1 2020-2021: Growth period

1.1 Actual situation and data analysis

a Stock market situation in 2020

- From the late January of 2020, the Covid-19 outbreak negatively impacted almostevery sector of the economy; and

the stock market, with no

exception, witnessed a

significant decline in the first

quarter of the year The market

saw its worst period in March,

when the VN-index reached 657

points on March 24, down

33,51% compared to the end of

2019, the lowest within 3 years

(Figure: VN Index on Mar 24, source: https://tradingeconomics.com)

- However, from the second quarter, the market experienced a substantial recovery andhad positive gaining sessions Typically, in the trading session on April 6, VN-indexincreased by 4.98%, the strongest increase since August 2001 until there BetweenJuly and August, the VN-

index hovered around the

850-point mark as the

second Covid-99 wave hit in

late July The market began

to stabilize in September,

rising 3.6 percent to 914

points, when the authorities

considered the outbreak to

be under control

(Figure: VN Index on Apr 06, source: https://tradingeconomics.com)

- According to the State Securities Commission of Vietnam, ending the last session in

2020, VN-index closed at

1103.87 points, rocketing by

67% compared to the lowest

point of the year and increasing

by 14,9% compared to the end

of the previous year

(Figure: VN Index on Dec 31,

source: https://tradingeconomics.com)

- In addition, thanks to the sharp recovery of the stock market, a record-low interest

rate, the amount of money flowing into the securities investment channel, the market

witnessed an unpredictably high level of new investor in history: by the end of

November, the total number of new accounts opened reached 332,886 accounts, an

increase of 94% compared to the number of new accounts opened in 2019 In which,

the new domestic individual investors accounted for 329,425 This took the total

number of accounts to nearly 2.77 million last year, equivalent to 2.8 percent of

Vietnam's population

b Stock market situation 2021

- In 2021, Vietnam’s stock market continued the upward trend from the previous year

and continued setting many

unprecedented records in its

21-year history The VN-index

reached a record high when

surpassing 1500 points on

November 25 (an increase of

nearly 36% in comparison with the

- These results have put Vietnam’s stock market in the group of 7 markets with thehighest growth in 2021 with 35,73% Besides, the domestic stock market was alsoamong the most profitable markets in the

world, followed by the US, India and

- The number of securities investors kept experiencing a sharp increase As reported bythe end of November, the total number of securities accounts was 4.08 million Thus,within 11 months, there were more than 1.31 million new accounts registered, ofwhich domestic individual investors opened 1.306 million accounts It can beconcluded that 2021 was a record year of attracting investors to participate in themarket

+ The Ministry of Finance was requested to urgently submit to the Government amechanism for tax and fee exemption and reduction; proposed to the competentauthorities solutions on taxes and state budget expenditures estimated at 30,000billion VND to remove difficulties for production and business, ensure socialsecurity to cope with the Covid-19 epidemic

- Most of the capital flow was put back into the investment market On the other hand,the bank interest rates were continuously lowered over time: In 2019, interest on bankdeposits exceeded 8% Nonetheless, in response to the pandemic, the State Bank ofVietnam, cut interest rates three times last year According to SSI's statistics, depositinterest rates decreased by a total of 2 - 2.5% in 2020 In the first quarter of 2021,there were some adjustments to

increase and decrease slightly

from 0.1 to 0.4% of interest

rates at some commercial banks,

focusing on short terms and

individual customers)

(Figure: Vietnam's policy developments, source: eMagazine)

These were the culprits to cause investors to find other profitable investing channelssuch as stock, real estate rather than saving or investing to expand production andbusiness Even the social distancing also makes more people interested in the stockmarket, especially the profit from this channel is now more attractive than other legalinvestment channels

- The Vietnamese have turned to stocks to make money - some because they lost theirjobs, others because they can't invest in their businesses (According to the GeneralStatistics Office, in 2020, 101.700 companies closed or suspended operations) Somany people piled into the market in December, and the Government's Vietnam Newsreported that they jammed the Ho Chi Minh City Stock Exchange

1.3 Impact of the stock market on economy in 2020 - 2021

- In 2020, social distancing caused gambling and usury activities to be frozen(including the suspension of lottery issuance) Consumption demand decreased,tourism, eating, and daily social activities also decreased That caused a huge amount

of money to be stagnant in the people Meanwhile, the stock market was considered

an "essential activity" and remained open every day The attractiveness of securitiesattracting large amounts of money was an easy consequence And the rush to invest insecurities spread all over the world, from the US or Pakistan to India, China,Indonesia and of course Vietnam

- In the period of 2020-2022, the scale of new account opening was even more terrible:

More than 3.64 million new accounts were

opened in the past 3 years while by the end of

2019, the total number of new accounts was

2.37 million

(Figure: The scale of new account opening,

source: eMagazine)

- In terms of the wave of crazy boom of stock

markets around the world, billionaire Leon

Cooperman - head of the famous US hedge fund Omega Advisors posted a warningthat the arrival of these small individuals who are eager to make a profit will have to

"end in tears" Millions of investors had a whole year to mock this warning, but thetruth came, when the markets crashed in 2022 The representative index of Vietnam'sstock market, the VN-Index, closed The door was at the highest peak in history at1,528.57 points on January 6, 2022 The lowest closing level of 2022 was 911.9 points

on November 15, 2022, equivalent to a decrease of 40.34% This was the biggest drop

in the world

2 2022: The year of volatility

2.1 Real situation and data analysis

- FLC shares and the group of FLC shares

“family” started to plummet

+ FLC fell to its floor price at VND13,600

(from over 22.000 VND in 3/1)

(Figure: FLC shares in 3/1, source: vneconomy)

+ Many stocks in the family, including FLC,

ROS, AMD, KLF, ART and HAI, faced a sharp drop due to selling pressure ROSstood at the floor price at VND8,770, and HAI tumbled to its floor price at

+ VN Index reached 1492.15 points, up 0.14% compared to February

+ Indexes that recorded the highest growth included: information technology (VNIT)

up 14.78%, health care industry (VNHEAL) up 7.94% and consumer goodsindustry (VNCOND) increasing 7.81%

=> Even when risks appear, in the first 3 months of the year, Vietnam's stock marketremained stable and fluctuated in the range of 1,450 - 1,550 points

b Quarter II

● 29/3: CEO of FLC Group was arrested

● 5/4: Tan Hoang Minh's nine bond issues worth 10 trillion was canceled

● FED increased its interest rate (2nd time) to tame inflation

● FED increased its interest rate (3rd and 4th time) by a total of 1.5%

● Oil price increased to 32.000VND

- From April to early July: The start of the gradual decline in VN index

+ VN-Index tumbled 23.1% to 1,172pts in just one month after the time that those events took place due to panic

selling momentum as well as

“margin call” action across the

market

+ VN-Index plunged a further

31.68 points to 1,149.61 points

(6/7), this is the lowest point in

the past 1 year of the market

(Figure: VN-Index on July 6th, source: tradingeconomics.com)

c Quarter III

● 27/7: FED increased its interest rate (4th time) by 0.75%

● 22/9: FED increased its interest rate (5th time) by 0.75%

- VN-Index's falling streak continues: longer and more devastating: The deepest drop was in September, October and the first half of November Selling force weighed on most of the industry groups, with the whole market recording nearly 400 stocks hitting floor prices.

d Quarter IV

● 8/10: CEO of Novaland Group was arrested

- Since the beginning of Sep-22, VN-Index continued to extend the downtrend, slumping further and recorded the low level of 1006pts on 11 Oct 2022

(Figure: VN Index on Oct 11, source: vn.tradingview.com)

- Vietnam’s benchmark VN-Index plunged 3.3% to 986.15 points on 24/10, lowest in

23 months, the lowest since November 2020, with Bank for Foreign Trade of Vietnam(VCB) and PetroVietnam Gas JSC (GAS) among the biggest losers

- Up to 685 stocks closed in the red, including 222 plunging to the floor prices, while only 173 others managed to gain

● 3/11: Shares of No Va Real Estate Investment Group (Novaland, code: NVL) and PDR of Phat Dat Real Estate Development Joint Stock Company suffered the losing streak of 17 consecutive sessions

● 3/11: FED increased its interest

rate (6th time) by 0.75%

- VN-Index experienced the deepest

plunge since early October on

Thursday, with 447 stocks

declining, including 170 hitting

their floor prices The red color

covered the market with 447 stocks

closing below the reference levels, over 20 times higher than the number of gainers, 21.

- The VN-Index dropped to the bottom of 911,9 points in the morning of November 15

(Figure above: VN Index on Nov 15, source: realtime vn-index, vnexpress.net)

● 9/11: Oil price decreased

● 9/11: Russian military forces retreated from Ukraine cities

● 14/12: FED increased its interest rate (7th time) by 5%

● 15/12: The state bank of Vietnam started to buy US dollars, pump Vietnamese dong into market

- The bottom-fishing demand of domestic investors and foreign investors' buying at a record high in November and December

helped the stock market recover strongly in

about 3 weeks, from mid-November to early

December The VN-Index sometimes went

up to nearly 1,100 points, before falling

back in the last 3 weeks of the year to

1,007.09 points

=> The domestic stock market ended a turbulent

year at 1,007.09 points

(Figure: VN-Index on Dec 30, source: infographics.vn)

2.2 Major influential factors

a Global factors

● The prolonged geopolitical tension between Russia and Ukraine

Not only has the war in Ukraine set off a geopolitical realignment, but it has causedeconomic hardship far from the epicenter of the fighting:

- As Ukraine fights for survival, Western governments are taking steps to punishRussia Russia is one of the world's largest producers of oil and fuel

- On Mar 8, President Biden signed an Executive Order (EO) to ban the import ofRussian oil, liquefied natural gas, and coal to the United States, which initially caused

a steep spike in prices

- In particular, prices surged in March and reached $139.13 a barrel, the highest since

2008

- Therefore, the pandemic has left the global economy with two critical points of

vulnerability - seriously high inflation and jittery financial markets.

However, moves by European nations to lock in alternative sources have largelyalleviated those price hikes So now prices have returned to pre-invasion levels

● Inflation rate and Interest rate of the USA

High inflation after more than a year of

loose monetary policy forced central banks to raise

interest rates and stop injecting money into the

economy

(Figure : Consumer Price Index for All Urban

Consumers, 12-month percent change, by

expenditure category, June 2022, Source: U.S.

Bureau of Labor Statistics.)

- USA inflation rate increased dramatically

in 2022, reaching 40-year highs, especially

grocery and energy prices Overall, the

general index of prices increased by 8.2

percent.; the monthly increase was between

6.5% and 9.1% (peaked in June)

- The Federal Reserve had raised the federal funds rate 7 times in 2022 and expandedthe target range by 75 basis points three times, most recently in September Themedian projection for the federal funds rate is 4.4% for 2022 and 4.6% for 2023

- Rising interest rates always bring a downturn in consumer spending Unfortunately,this unwanted consequence is highly related to Vietnam's economy because the USAwas the nation that Vietnam exported the most to, with approximately 30% each year

● The Chinese government has remained committed to zero-Covid

- China is the most significant material supplier for production in Vietnam; importedgoods from China account for more than 33% of total imports (2021) However,supply chain disruptions due to partial lockdowns in China will likely affect theoutlook for importing raw materials, delaying delivery times and affecting domesticproduction schedules Thus, the growth rate of the manufacturing sector slowed down

- Vietnam exports about 17% of its goods to China (2021) However, based on reportsfrom many organizations, China's economic growth rate has decreased, implying thatconsumer demand in this large market will decline Accordingly, the recovery of

export growth to the Chinese market may face difficulties in the following months.

b Domestic factors

● Raising interest rates to curb increasingly severe inflation

On Oct 24, 2022, the State Bank of Vietnam issued Decision No 1812/QD-NHNN onthe maximum interest rate applicable to VND deposits; it decided to revise several interestrates by 1%, starting from Oct 25

Vietnam's central bank announced on Sept 22 to raise the policy rates by 100 basispoints in a rare monetary tightening move aimed at keeping inflation under 4% - Vietnam'sbiggest economic challenge at that time - stated by SBV Governor Nguyen Thi Hong

● Stoking speculation and ignorant individual investors

Individual investors piled into the Vietnam stock market at an unprecedented pace,accounting for the majority even though they were not knowledgeable in this field.Unfortunately, due to their patchy and superficial understanding, they can easily fall into the

"Appeal to popularity" fallacy or be taken advantage of by other skilled investors.For instance, 2 days before Mrs Truong My Lan was officially arrested, several well-informed people had grasped this news; therefore, they speculated, temporarily pushed the

VN INDEX, and finally made a profit by selling them to ignorant investors before theeventual decrease Moreover, when the price started to fall, the individual mass investors,with their weakened belief, would immediately follow others, sell at a lower price, andunintentionally make the circumstance much worse

● Stock market violations

The market encountered continuous shocks from internal shareholders and listedcompanies and in corporate bond issuance consultancy of securities firms In addition, manycriminal cases, including the prosecution and arrest of senior leaders at giant corps, affectedthe sentiment of individual investors, accounting for 90% of the total trading accounts To bemore specific, there are:

- The former chairman of FLC Group, Trinh Van Quyet on Mar 29 for manipulatingthe stock market

- Do Anh Dung, former chairman of Tan Hoang Minh Group, and six accomplices for

"defrauding to appropriate property" on Apr 5

- The chairwoman of Van Thinh Phat Group, Truong My Lan, for "defrauding toappropriate property" on Oct 8

=> Although these cases have embedded considerable disbelief in every citizen's mind aboutthe government's ability to control and manage the stock market, their impacts regardings theeconomy are relatively mild and limited Taking the FLC case as an example, the arrest of theleader can only somehow decrease the share prices of 2 groups:

- Those included or related to FLC's ecosystem, such as FLC, ROS, AMD, KFL, ART,HAI, GAB

- Banks holding their loans: STB, OCB, BID hay NVB

● Corporate bonds frozen

- The bond market became frozen in the second half of the year following scandals withTan Hoang Minh and Van Thinh Phat and the draft decree 65 that amended Decree153

- Many enterprises decided to restructure their debts and bought back VND164 trillionworth of bonds within 11 months

However, besides various disadvantages in 2022, many bright factors and policies

also hold the potential for a temporary and modest rebound for Vietnam's stock market.Overall, they were to manage the monetary and credit policies flexibly, stabilize macro-economic conditions, and contain inflation:

- The spirit of optimism and positivity in all stock players and consultants, especially inthe first 2 quarters of the year

- On January 11, the National Assembly of Việt Nam adopted a Government-proposedsocio-economic recovery program worth nearly VNĐ350 trillion (approximatelyUS$15 billion) over the next two years

- Vietnam will remove its COVID-19 restrictions on international passenger flightswith all markets starting Feb 15, with no limitation on the number of flights

- On Mar 24, the Vietnamese government kicked off an interest subsidy of 2% perannum on commercial loans for businesses, cooperatives, and households for 2022-2023

2.3 Impact of the stock market on economic growth

Vietnam's economy grew 8.02% in 2022, the highest rate recorded in 2011-2022 Theincrease is three times the growth in 2021 and exceeded the 6-6.5% target set by thegovernment Vietnam's strong and solid economic performance was backed by domestic retailsales, in stark contrast to the weak performance of the VN-Index (VNI) in the stock market,

which was deliberately down 51% on Sept 30

(Figure: Performance of Vietnam Retail Sales and VN-Index, from Jan-22 to Jul-22, Source: VinaCapital)

(Domestic consumption has rebounded strongly and become Vietnam's leading economic growth driver)

● Strong Domestic Consumption Offsets Weakening US Demand

While a slowing US economy is likely to temper Vietnam's export and economicgrowth (Export slowed from 38% yoy in 7M21 to 24% in 7M22, the USA is Vietnam'sbiggest export market), the impact of that slowdown will be more than offset by Vietnam'sstrong domestic economy

During the pandemic, the retail grocery industry has undergone numerous transitions,switching consumers from conventional food shops to various alternative channels, e-commerce for instance; all of which has contributed significantly to the expansion of thegrowth rate of Vietnam in 2022

Finally, the revenues and earnings of companies listed on Vietnam's stock market areprimarily driven by the domestic economy, which is why the stock market has been expected

to somehow benefit from unexpectedly solid domestic growth

● Alarm for a stock market with better transparency and control

Overall, recent scandals and the downward in 2022's stock market have laid a reset atmost levels, all aimed at improving publicity and transparency, strengthening marketsurveillance and inspection, and adopting better-qualified investors These were conductedthrough many actions:

- Operating the technical cooperation project "Capacity Building on Improving Fairnessand Transparency of Vietnamese Equity Market," collaborated with the JapanInternational Cooperation Agency (JICA)