PART A: Individual Research Report (maximum 2,000 words) (45%) As part of your development as a critical thinker within the financial sciences there is a need to understand and partake in detailed international discussions about relevant and recent issues within the financial markets. As such your task is to write a 2000word individual research report on a topic of your choice. Your topic should have a focus on the core financial markets including bond, equity, andor derivative markets. Research report guide: You should begin your research report by having consideration for contemporary issues within both the national and international financial markets – bonds, equities, andor derivatives. You try to should identify an issue that you believe is both important and of interest to you. In the individual research report, you should conduct your own research, which goes beyond the course materials provided to you. The aim of this assessment is to demonstrate your knowledge and critical understanding of the topic covered over the academic semester. You should identify a core research question that would guide your exploration of the area of research interest that you have identified. Your final product will be assessed on how well you succeed in identifying, explaining and analysing relevant issues and arguments, to produce a clear and concise paper, where issues are logically developed in a wellthoughtout structure, and how well you can support your findings with the relevant evidence. Note that your report will be conceptual in nature and will focus on providing a robust narrative of the existing literature behind your area of research. You should structure this narrative appropriately so that it provides the reader with the clear, and logical understanding of the foundations of your research topic, and the lead up to the current issue at hand. Your research report should focus on the academic literature with minimal use of actual data. The individual research report should contain the following sections: Title (less than 15 words) Abstract (less than 150 words) Introduction – this should provide the motivation of the research question and some background. The introduction should also briefly state your core research question, identifying the key issues, and briefly summarise what you have found from your review of the academic literature Main body – you should section the main body of your research report. Use subheadings, to divide your research paper into sections that examine different aspects of your research question, to provide a logical structure for your research paper and which shows the logical development of your ideas. Conclusion – this section should state your findings in relation to your research question and the possible implications of your research on practice References – Harvard format Part B: Reflection on the Industry Talk (maximum 500 words) (5%): You are required to write a reflection on the industry talk. Your reflection should address the following questions: What is the core theme of the presentation? What and how can you relate the presentation to a topic(s) that has been covered on this course? What are your key takeaways from the discussions?
BAFI3182-FINANCIAL MARKET AND INSTITUTIONS ASSESSMENT INDIVIDUAL RESEARCH PROJECT Lecturer Huy HDV Group 09 Type of Assignment Due date Individual Research Report (50%) Word Count 20 May 2022 2500 Pages 13 Table of Content PART A: INDIVIDUAL RESEARCH REPORT .2 I ABSTRACT II INTRODUCTION III LITERATURE REVIEW .3 The impacts of SARS-Covid-2 epidemics on the stock market performance .3 DETERMINANTS AFFECT THE STOCK MARKET AND STOCK PRICES a Inflation rate b Interest rate c Exchange rate d Investor sentiment 10 IV CONCLUSION 10 V REFERENCES .10 PART B: INDUSTRY TALK 13 PART A: INDIVIDUAL RESEARCH REPORT How does the Covid-19 Pandemic impact the stock market performance? I ABSTRACT This study aims to investigate and analyze the impacts of the COVID-19 pandemic on the equity market (stock market) performance in some most affected countries around the world in general and Vietnam in particular, based on the number of confirmed cases and deaths, as well as several relevant determinants such as inflation rate, interest rate, exchange rate, and investors’ sentiment This research relies on panel-data regression models to determine impacts of the daily expansion in the number of COVID-19 affirmed cases and deaths during pre-lockdown and lockdown daily stock returns of Vietnamese listed firms It is confirmed that the COVID-19 pandemic places negative influences on the overall economy and equity market worldwide, including in Vietnam Ultimately, this paper has discovered that the Vietnamese stock market performs oppositely between pre-lockdown and lockdown periods while their stock market has a sign to gradually rebound since the nationwide lockdown Furthermore, Vietnamese stock performance and its return acted heterogeneously in different market industries during the COVID-19 boom II INTRODUCTION COVID-19 pandemic-a large-scale outbreak of infectious disease originating in Wuhan, China, not only disturbs the health status of the population and significantly knocks out domestic and international trading in most countries worldwide, including Vietnam (WHO 2020) Changes in macroeconomic variables like commodity demand and supply bottleneck; higher unemployment rate, the sharp drop in GDP, and rising uncertainty substantially threaten many listed companies' survival and their further sustainability, even some are bankrupt This seriously reduces both businesses' and individuals' income and destroys investors’ confidence in holding stocks Thus, the pandemic hit a painful blow to both the national and international stock markets, causing great volatility in overall stock markets negatively (Al-Awadhi et al 2020; Alfaro et al 2020; He et al 2020; Zhang et al 2020) This research will analyze and evaluate impacts of the COVID-19 crisis on the Vietnamese stock market performance, both internationally and domestically To have a comprehensive understanding of COVID-19's negative influences on the Vietnam equity market, this paper determines four relevant factors such as inflation rate, interest rate, exchange rate, and investors’ sentiment Additionally, briefly inform that the Vietnamese stock market starts to be thriving since nationwide lockdown due to successfully controlling the pandemic and rebounding its economy III LITERATURE REVIEW THE IMPACTS OF COVID-19 PANDEMIC ON THE STOCK MARKET PERFORMANCE a International outlook With the emergence of the COVID-19 pandemic, the world’s stock markets had to confront substantial negative fluctuations Hence, most stock market indices all over the planet have documented their greatest one-day plunges on record, while no sector has been left unharmed, but each sectoral stock market will be affected at different levels Ozil and Arun (2020) underlined the trend of the USA stock market has fallen below 30% from its peak in Mar- 2020 The evolution of new Coronavirus varieties puts higher tension on stock markets of the United Kingdom, Germany, Brazil, and Columbia which instigated those to get more deteriorate than the U.S, with diminishes of 37%, 33%, 48%, and 47%, respectively (Fernandes 2020) The expansion in the number of COVID-19 confirmed cases and deaths is related to a significant increase in the illiquidity and volatility of the world equity market, which debilitates the stock returns of most listed companies engaging the entire stock market (Chen et al 2009) Results of the Kartal quantile regression model implementation validated the negative correlation between stock market indices and the ever-increasing COVID-19 confirmed cases and deaths in East-Asian countries (Kartal et al 2021) After resulting, this demonstrated that Covid-19 high- spreading waves were demolishing and stagnating all-inclusive equity markets' potentialities Covid-19 epidemic hit psychological shocks for investors The emergence of economic losses and higher unemployment rate created triggered anxiety and pessimism for investors about their future incomes when they’re holding higher-risk securities (He et al 2020; Liu et al 2020) Correspondingly, many decided to turn to “safe-haven assets” such as precious metals (gold and silver), currencies (US dollar and Swiss franc), and US Treasuries (T-bill and T-bond) to mitigate risks This economic depression initially prompted a massive selloff in stock markets as investors transferred risky stocks into safe-haven assets to safeguard their riches (Bofinger et al 2020; Wyplosz 2020) Thus, stock prices will fall, and stock markets have been struck more harshly by the COVID-19 hit (Adekoya & Nti 2020) Potential yields gradually decrease as investors make less money on the difference between the bid and ask prices while holding debased stocks b Vietnam Vietnam’s stock market is made up of main stock exchanges: the Ho Chi Minh Stock Exchange (HOSE) and the Hanoi Stock Exchange (HASTC) Due to the lockdown in the domestic trading and international business, there was a stagnation economy, and a large-scale financial crisis emergence caused investors’ worries and bewilderment, reduced their confidence in holding stock, and led to fluctuations in Vietnamese stock market Prices of most stocks trading on Vietnam securities market plunged in Q1-2020 During the trading session in Mar- 2020, the VN-Index fell by 28% compared with 31 Dec-2019, bringing about a GDP deficiency of USD 37.4 billion of the Vietnam equity market capitalization (Dao and Gan 2021) According to Table 1, the average returns (RE) of all stocks were negative during the study period (Covid-19 outbreak period) demontrated for a downhill stock market in Vietnam Table records the random-effects panel-data regression results of models (1) and (2) (Figure 1) This table consolidated results that the daily number of confirmed cases and deaths increased in Vietnam (CASE) considerably and adversely influence stock prices in the general market index and relevant sectors, as well as sluggish stock returns of nearly all Vietnamese firms on HASTC and HOSE (Al-Awadhi et al 2020) The reactions of the stock market to the epidemic aren’t homogenous among different sectors and industries and stock market status can be varied by item supply and demand changes Commodity prices can rule related stock prices positively, while demand and supply of commodities can vary their prices Covid-19 waves caused a decrease in both aggregate supply and aggregate demand in general However, in fact, there will be inequality in different commodity demands assuming in the bottleneck supply scenario If revenues rise due to high commodity prices caused by shortage (DD), the stock prices will fall Consequently, higher inflation rates worsen stock market presentation However, in fact, stock markets engaging in different sectors/industries perform differently under COVID-19 impacts Several industries like food, pharmaceutical, healthcare, and high-tech showed impressively positive returns (Alfaro et al 2020) Their stock prices fell initially but a little due to global impacts But those industries can rapidly rebound and achieve potential returns since their items’ demand can grow fast in epidemic because of their necessity to recover human life during serious pandemics Hence, their sales numbers are enriched, reaching larger revenues to compensate for higher manufacturing-costs pressure As a result, their stock prices recover and tend to rise back, inducing relevant sectors’ stock markets to be attractive again The inflation rate in Vietnam was 3.22% in 2020, a 0.43% increase from 2019 but is considered increasing at moderate level Also, Vietnamese stock market firstly experience deterioration and falling stock prices due to common inflationary influences, compared to some top impacted by climbing inflation such as U.S (4.7%), India (6%), and U.K (6.2%) (WorldBank 2020) b Interest rate Alam and Uddin (2009) recorded an inverse correlation between interest rate and stock prices, as interest rates move higher, stock prices move lower, and vice versa In detail, when interest rates rise, both businesses and consumers (borrowers) tend to reduce their expenditures because they must pay more loan (debts) costs Product and services productions are downsized, higher cost payments which make both businesses lose potential profits at a different level Subsequently, the loss of profits of companies is likely to bewilder investors who are holding their stocks This tendency instigates investors to sell off their stock more, causing a stock market surplus (S>D) that pushes the price down, combining tightened capital flows into stock markets leading to stock market getting worse The opposite case holds for when interest rates are lowered Since Covid-19 pandemic caused Vietnam’s economic stagnation and many businesses’ dooms, the State-Bank-of-Vietnam (SBV) decide to tighten the monetary policy as facilitating money supply and cutting interest rate benchmark from 5-6% to 3.4-4% attempt to support economic recovery (Vietnamese-Ministry-of-Finance-2020) Lowering interest rates can stimulate more operators and their investment that may pull back some industrial stock prices with the hope to better the entire stock market further c Exchange rate Depreciation is the loss in value of a country’s currency against other foreign currencies Studies that have investigated the impact of domestic currency depreciation on the stock market have negatively affected the prices of the stock market (Soenen & Hannigar 1988; Phylaktis & Ravazzolo 2005) Prices of stock exchanged in an economy would decline following a devaluation in the local currency One reason is that the currency depreciation would yield a lower worth of dividend payments for investors who hold domestic stocks in that economy Moreover, the devaluation can flag low growth potentialities for portfolio administrators who embrace stocks in the domestic economy (Rehan et al 2019) Thus, individuals will ultimately move their cash to purchase foreign stocks where they are able to significantly acquire more profits, rather than continuously place funds in the domestically risky market The opposite case holds for currency appreciation d Investor sentiment Investors' sentiment or confidence can manipulate the stock market performance which can push-up or pull-down stock prices (Baker & Wurgler 2007) If stock prices keep rising, investors are said to be ‘bullish’, having positive sentiment for stock speculation But if price falls are predicted, sentiment is ‘bearish’, which means investors have negative attitudes regarding stock market performance, encouraging them to start selling stock to minimize loss After the lockdown until now, a good signal for the Vietnamese stock market to recover appears when the Vietnamese stock market receives positive stock confidence returns from both domestic and international investors Their strong confidence and trust in Vietnam government's reactions to combat the pandemic successfully for favorable stock prices have pushed up Vietnamese stock prices again, expecting a rebounded stock market (Dao & Gan 2021) IV CONCLUSION Conclusively, the impacts of the coronavirus pandemic on both world economy and overall equity market are adversely serious since new confirmed cases and deaths are continuously increasing daily, and Vietnam is no exception Nearly all stock market indexes plummeted dramatically, and stock prices fell which limited potential yields of investors and deteriorated stock market performance Furthermore, with high inflation rate, interest rate, and exchange rate variation, investors’ reactions contributed to explaining the negative effects caused by this outbreak However, thanks to the right and wise policies, timely actions of Vietnamese Governments, and investors’ trusts, the equity market has gradually been prospectively attractive again V REFERENCES Adekoya, A.F and Nti, I.K 2020, ‘The COVID-19 Outbreak and Effects on Major Stock Market Indices across the Globe: A Machine Learning Approach.’, Indian Journal of Science and Technology, vol.13, no.35, pp.3695–3706 Alam, M.M and Uddin, G 2009, ‘Relationship between Interest Rate and Stock Price: Empirical Evidence from Developed and Developing Countries’, International Journal of Business and Management, vol.4, no.3, pp.43-51 Al-Awadhi, A.M., Al-Saifi, K, Al-Awadhi, A and Alhamadi, S 2020, ‘Death and contagious infectious diseases: impact of the COVID-19 virus on stock market returns’, Journal of Behavioral and Experimental Finance, vol.27, p.100326 Alfaro, L, Chari, A, Greenland, A.N and Schott, P.K 2020, ‘Aggregate and Firm-Level Stock Returns during Pandemics, in Real Time’, Working Paper, National Bureau of Economic Research Baker, M and Wurgler, J 2007, ‘Investor Sentiment in the Stock Market’, Journal of Economic Perspectives, vol.21, no.2, pp.129–151 Bofinger et al 2020, "Economic implications of the COVID-19 crisis for Germany and economic policy measures", National Center for Biotechnology Information, vol.100, no.4, pp.259-265 Chen et al 2009, ‘The positive and negative impacts of the SARS outbreak: a case of the Taiwan industries’, The Journal of Developing Areas, vol.43, no.1, pp.281-293 Dao, L.T.A & Gan, C 2021, ‘The impact of the COVID-19 lockdown on stock market performance: evidence from Vietnam’, Journal of Economic Studies, vol.48, no.4, pp.836-851 Fernandes N 2020, Economic Effects of Corononavirus Outbreak (COVID-19) on the World Economy, IESE Business School Working Paper, SSRN, viewed 16 May 2022, Giang, N.K and Yap, L 2020, Vietnam is Asia’s best equity market performer in may, Bloomberg, viewed 13 May 2022 Hatmanu, M & Cristina Cautisanu, C 2021, ‘The Impact of COVID-19 Pandemic on Stock Market: Evidence from Romania’, International Journal of Environmental Research and Public Health, vol.18, p.9315 He, Q, Liu, J, Wang, S and Yu, J 2020, “The impact of COVID-19 on stock markets”, Economic and Political Studies, vol no.3, pp.1-14 10 Kartal, M.T, Depren S.K, Depren Ö 2021, ‘How Main Stock Exchange Indices React to Covid- 19 Pandemic: Daily Evidence from East Asian Countries’ Liu, H, Manzoor, A, Wang, C, Zhang, L and Manzoor, Z 2020, ‘The COVID-19 outbreak and affected countries stock markets response’, International Journal of Environmental Research and Public Health, vol.17, no 8, p 2800 Ozili, P.K, Arun, T 2020, Spillover of COVID-19: Impact on the global economy, SSRN, viewed 17 May 2020, Phylaktis, K & Ravazzolo, F 2005, ‘Stock price and Exchange rate dynamics’, Journal of International Money and Finance, vol.24, no.7, pp.1031-1053 Rehan et al 2019, ‘The relationship between exchange rate and stock prices in South Asian Countries’, International Journal of Innovation, Creativity and Change, vol.6, no.9 Schoenfeld, J 2020, The Invisible Risk: Pandemics and the Financial Markets, Tuck School of Business Working Paper, SSRN, viewed 18 May 2022, Soenen, L.A and Hannigar, E.S 1988, An analysis of Exchange rate and Stock Prices: The US experience between 1980 and 1986, Akron Business and Economic Review, Winter, p.7-16 Vietnamese Ministry of Finance 2020, Central Bank cuts interest rate to buffer COVID-19 impact, Vietnamese Ministry of Finance, viewed 19 May 2022, WHO 2020, Director-general’s opening remarks at the media briefing on COVID-19-11 2020?, WHO, viewed 10 May 2022, 11 World Bank 2020, Inflation, consumer prices (annual %)-Vietnam, World Bank, viewed 10 May 2022, Wyplosz, C 2020, So far, so good: And now don’t be afraid of moral hazard, VoxEU.org, viewed 15 May 2022, PART B: INDUSTRY TALK We have an Industry talk section with Mr Minh-Tri Doan, presenting mainly about the value chain in the financial market The value chain in the financial market is familiar with where people create products and services and then deliver them to the end-users (consumers) in terms of value chain operation in financial sectors Particularly, more concerning the financial market from both angles The supply side included financial institutions and corporations, while the demand side consisted of consumers (individuals) All products and services, as well as value chain operations, have to be raised by market needs Next, he discusses the concept of financial literacy with a model “Earn-Spend- Borrow-Protect-Invest” It’s extremely important for me to manage my future cash flow effectively I can infer some key instructions in this process as firstly, people earn money and manage money effectively, either from two ways of professional career or entrepreneur The guest speaker said that we need to optimize our spending and control it Secondly, if cash availability is insufficient to finance or spend, we can borrow to maintain our expenditure and our operation Then when our cash flow is stable, we have enough cash that we need to protect them from unpredictable events and life risks Usually, people pay for life insurance, medical insurance, or casualty insurance to protect themselves Finally, if we have more surplus cash sources, we can invest in other financial assets or other potential sectors to expect more prospective returns Through his explanation, I can conclude that the key to financial literacy is to understand and manage the cash flow efficiently and how we can serve our purpose in each financial literacy component According to the guest speaker, most people tend to pay more attention to investment He mentions some financial markets at first as capital markets, money markets, derivative markets, or bond markets and I see those are the hugest financial markets for securities trading 12 and investment, which we have covered in this course He declares Fintech and Blockchain can help investors become smarter This topic is quite new and interesting Fintech and Blockchain change the investors’ behaviors when they start their investment journey In-depth, Fintech is disrupting the journey of investors Fintech can change the face of the Equity market, which is one of the primary financial markets, we learned in this course It’s apparent that the equity market (stock market) is a place where stocks and shares of companies are issued and traded which appeals to lots of domestic and international investors engaging in trading sessions for expected profit earnings A few fintech organizations offer services to investors comprising AI, online payment applications, and the based platform that manages the exchange-traded funds (ETFs) portfolio, as indicated by the investors’ objectives Fintech delivers live statistics on the latest trends, organization data, public sentiments, and more This helps investors have strategic investment portfolios and make informed decisions Blockchain also is included as a kind of Fintech that places positive influences on facilitating investors’ trading 13