3 CHAPTER 1: THEORETICAL BASIS OF FACTORS INFLUENCING STOCK PRICES OF LISTED COMPANIES ON THE VIETNAM STOCK MARKET .... -The Impact Levels of Various Factors on Price Fluctuations of Lis
Rationale for Research Topic Selection
In today's economic landscape, the stock market plays a crucial role as a key channel for capital mobilization and a popular investment platform It injects substantial capital into the economy through trading activities involving the buying and selling of securities Serving as a barometer for economic fluctuations, the stock market often anticipates changes in the economy Consequently, stock prices serve as indicators of business value and overall macroeconomic health.
The official inauguration of the Ho Chi Minh City Stock Exchange on July 20,
The Vietnamese stock market was established in 2000, with its inaugural trading session occurring on July 28 Over the past 23 years, it has significantly contributed to the development of market infrastructure, serving as a vital channel for capital mobilization, an attractive investment destination, and a key driver of economic growth.
Vietnam's stock market remains relatively young and underdeveloped compared to global counterparts, with foundational aspects like the legal environment and investor education still in their infancy The market is characterized by significant and unpredictable stock price fluctuations that do not adhere to specific patterns or measurable data These challenges hinder the overall growth of the stock market and the economy, posing considerable risks for investors, particularly those who are new and lack sufficient knowledge or experience.
Identifying the factors that influence stock price fluctuations is essential for investors By analyzing historical price movements and related factors, investors can develop effective strategies to manage risks and optimize their investment decisions.
Hence, the author chooses the topic "Factors Affecting Stock Prices Listed on the Vietnamese Stock Market" for analysis.
Research Objectives
- Categorizing the chemical factors influencing stock prices listed on the Vietnamese stock market
- Assessing the impact of various factors on the prices of listed stocks in the Vietnamese stock market
- Proposing solutions for managers and investors to mitigate risks and achieve optimal investment effectiveness.
Research Questions
- Factors Influencing Stock Prices on the Vietnam Stock Exchange
-The Impact Levels of Various Factors on Price Fluctuations of Listed Stocks on the Vietnam Stock Exchange.
Research Subject and Scope
- Spatial Scope: Stocks belonging to the VN-30 group
- Temporal Scope: Data collection and analysis conducted from 2018 to 2023.
Research Methodology
Qualitative Method: The factors influencing stock prices listed on the Vietnam stock market are identified based on previous studies and general theoretical frameworks
The author employs quantitative methods by applying statistical techniques to analyze collected databases This includes utilizing the target recovery method to identify factors that influence stock prices in the Vietnam stock market The process concludes with hypothesis testing to validate the findings.
Research Configuration Results
Alongside the Table of Contents, List of Abbreviations, List of Symbols, References, and Appendices, the thesis is divided into 5 chapters:
Chapter 1: Literature Review on Theoretical Foundations and Previous Empirical Studies to Determine Research Directions for the Topic
Chapter 2: Data Collection and Methodology
THEORETICAL BASIS OF FACTORS
Theoretical Basis of Stock Market
In today's economic landscape, the stock market serves as a vital platform for the trading, buying, and transferring of medium and long-term securities, facilitating changes in ownership among investors (Bach Duc Hien, 2009).
The stock market is essentially the movement of monetary capital—the transfer of money capital from ownership to business capital
Functions of the stock market
The stock market plays a crucial role in the economy, with four main functions:
The primary function of the stock market is to concentrate and accumulate capital for issuing entities and the broader economy By attracting investment capital, it plays a crucial role in fostering economic development The issuance process effectively mobilizes idle funds, channeling them into productive business activities and thereby expanding social production.
The stock market plays a crucial role in optimizing capital utilization by establishing investment mechanisms that facilitate efficient capital distribution Acting as a regulatory channel, it effectively mobilizes and reallocates capital from surplus regions to those in deficit, as well as from areas of lower efficiency to those with higher productivity.
The stock market creates a healthy investment environment that offers the public diverse opportunities to diversify and expand their investment portfolios With a wide range of securities varying in nature, maturity, and risk, investors can select options that align with their individual abilities, goals, and preferences This emergence of the stock market enhances the accessibility of investment opportunities, empowering individuals to make informed choices for their financial growth.
The stock market enhances liquidity for securities, allowing investors to easily convert their holdings into cash or other securities whenever they choose This liquidity is a key attraction for investors, providing a flexible and secure aspect of their investment capital.
The evaluation of enterprise operations through securities provides a comprehensive and accurate reflection of their activities, enabling quick and convenient assessments and comparisons This fosters a healthy competitive environment that enhances capital utilization efficiency, encourages the adoption of new technologies, and drives product improvement.
The stock market plays a crucial role in shaping macroeconomic policies by providing a sensitive and accurate reflection of the economic landscape When stock prices rise, it signals increased investment and economic growth, while declining stock prices serve as indicators of potential economic downturns (Assoc Prof PhD Pham Van Hung, 2020).
Objectives of the Stock Market
Stock markets worldwide are driven by three key objectives: ensuring efficient operations, promoting fair governance, and achieving stable development These goals are essential for any economic entity, as they foster a transparent and reliable trading environment that benefits all participants.
An efficient stock market effectively balances supply and demand, ensuring that prices accurately reflect relevant information that influences them Additionally, it minimizes transaction costs, allowing investors to maximize their returns on securities investments without significant erosion from these expenses.
Fair governance in the stock market promotes equality among participants by protecting investor rights, ensuring healthy market operations, and actively combating market manipulation to prevent price distortions.
To achieve stable and healthy stock market development, it is crucial to identify and address potential crises caused by liquidity shortages or excessive price volatility, as emphasized by Ph.D Bach Duc Hien (2015).
Structure of the Stock Market
Based on the trading method, the stock market is divided into two types:
The primary market, or issuance market, is where companies and governments issue securities for the first time to raise investment capital directly.
Secondary market, where securities issued for the first time in the primary stock market are bought and sold by various investors in the stock market
Based on the registration nature, the stock market includes the Exchange (centralized market) and the OTC market (decentralized market)
At the Exchange, all transactions are centralized in one location, where orders are directed to the trading floor to engage in the order matching process, facilitating organized trading sessions Only securities that adhere to specific listing standards are permitted for trading in this environment.
The OTC market facilitates trading for securities that are not listed on formal exchanges Unlike traditional exchanges, it lacks a centralized trading venue, relying instead on brokers who connect transactions via a vast computer network among securities firms and management systems.
Based on the circulating tools, the stock market is divided into three main types:
Stock market: This is the market for trading and buying/selling various types of stocks, including common stocks and preferred stocks
Bond market: This is the market for trading and buying/selling issued bonds, including corporate bonds, municipal bonds, and government bonds
Derivatives market: This is the market for issuing and trading other financial instruments such as stock options, warrants, and futures contracts (Nhat Cuong, 2021)
Principles of Operation of the Stock Market
The stock market operates based on three fundamental principles: intermediation, auction, and transparency
The intermediation principle in the stock market dictates that all trading activities, including the buying and selling of securities, must be conducted through intermediaries known as brokers These brokers execute transactions on behalf of clients, earning commissions while also offering additional services such as investment advice and market information Investors are unable to negotiate directly with one another for securities transactions; instead, they must place orders through their respective brokers, who then input these orders into the system to facilitate matching.
Overview of Stocks and Common Stock
Securities, such as bonds and stocks, serve as proof that investors have allocated funds through direct lending or capital contributions to joint-stock companies These financial instruments grant investors specific rights, with the primary right being the entitlement to income.
Characteristics of securities: Holders of securities can be both contributors of capital and owners or creditors of joint-stock companies Securities have the following main characteristics:
Securities are linked to various income-generating potentials, with each type offering distinct advantages Bonds provide a fixed and secure interest rate, making them a stable investment choice, while stocks, despite being less secure, present greater profit potential through dividends, especially when stock prices appreciate.
Investing in securities inherently involves risk, as fluctuations in potential profits indicate varying levels of risk associated with different securities Higher profit volatility signifies greater investment risk, highlighting the importance of understanding these risks when choosing securities for investment.
Securities offer liquidity, allowing them to be bought and sold on the stock exchange after issuance While the liquidity level may vary among different types of securities, they generally provide a liquid market for investors.
Classification of securities: There are many ways to classify securities based on different criteria Below are some methods of classifying securities:
Based on the issuing entities: Securities can be classified into 3 major groups:
Government securities, including government bonds and local government bonds, are financial instruments issued by the government to raise funds In contrast, corporate securities are issued by businesses and encompass various forms such as stocks, bonds, and beneficiary certificates, representing ownership or debt in the issuing organization.
Significance: Helps investors understand the origin of the securities they invest in
Securities are classified into two main categories based on capital mobilization: debt securities and equity securities Equity securities, commonly known as stocks, represent ownership rights in a joint-stock company, whereas debt securities, or bonds, signify a debt obligation of the issuer to the security holder.
Significance: Helps investors determine the type of securities they own
Securities can be categorized into two main types based on their income: stable income securities and variable income securities Stable income securities offer predetermined and consistent returns, whereas variable income securities provide returns that fluctuate based on specific factors.
Significance: This classification helps investors have a clearer view of the benefits they will receive when investing in a particular type of security
Securities can be classified into two main types: registered securities and bearer securities Registered securities have the owner's name recorded, ensuring clear ownership, while bearer securities do not include the owner's name, allowing for easier transferability.
Significance: This classification is used to determine the legal nature of the transfer of shares (Bach Duc Hien, 2015)
General Issues on Common Stocks
Common stock, or ordinary shares, represents a certificate that verifies shareholders' ownership rights within a company, granting them the entitlement to participate in the company's ordinary rights and benefits.
Characteristics of common stock: Common stockholders are usually ordinary shareholders and at the same time are co-owners of the company Common stock has the following main characteristics:
The company's common stock is perpetual and non-redeemable, meaning that common stockholders are considered owners rather than creditors Consequently, the company is not obligated to repay these stockholders like it would with a debt.
Dividends are perpetual and non-redeemable: By definition, common stockholders are owners of the company rather than creditors, so the company has no obligation to repay them like a debt
Dividends are variable and contingent upon a company's annual after-tax profits and its dividend policy When a business performs well, shareholders are generally rewarded with higher dividends Conversely, during periods of loss, dividends may be reduced or eliminated altogether Even successful companies may offer lower dividends based on their specific policies.
General Issues on Common Stock Prices
A common stock carries a lot of value Below are some definitions of the value of common stocks and how to determine them
Par Value of Common Stocks
The face value of common stock, or nominal value, is the value assigned by a corporation to each share and is displayed on the stock certificate This value is primarily relevant during the stock's issuance and is calculated by dividing the company's capital by the total number of shares available for sale However, the face value holds little significance for investors, as it does not correlate with the stock's market value.
Book Value of Common Stocks
The book value of common stock represents the equity of a company as recorded in its financial statements at a specific moment This value is calculated based on the company's accounting records, reflecting its overall financial health and net worth.
Calculating the book value of common stock allows shareholders to track changes in its value over time in relation to the original capital invested However, a key limitation of book value is that it fails to account for the company's growth potential and the expectations of investors regarding its future performance.
Intrinsic Value of Common Stocks
The intrinsic value of a stock, often referred to as its theoretical value, represents the stock's true worth at a given time, determined by factors such as the company's dividends, growth potential, and prevailing market interest rates This value is essential for investors, enabling them to evaluate the stock's actual worth against its market price to make informed investment decisions Two primary methods exist for calculating the intrinsic value of common stocks: the dividend discount model and the comparative valuation technique, with the dividend discount model being the most widely utilized approach for stock valuation.
The dividend discount model values a stock based on assumptions regarding the company's growth and dividend policies Essentially, the stock price reflects the present value of anticipated future dividend payments.
𝑖=1 (𝑖+𝑟) Depending on the dividend growth, the DCF valuation method is divided into three models: the Zero Growth model, the Constant Growth model, and the Differential Growth model
This method offers a direct evaluation of income through stock dividends, making it ideal for minority shareholders and firms with publicly traded securities It serves as a practical alternative to the complex task of valuing a company based solely on net assets and market capitalization.
Forecasting stock dividends presents challenges due to its reliance on future dividend distribution policies, making accurate predictions difficult Furthermore, identifying credible parameters for the forecasting model can prove to be a complex task.
Commentary: Each method of stock valuation has its advantages and disadvantages, depending on the investor's choice to determine the true value of the stock
Market Value of Common Stocks
Market value, or market capitalization, represents the current worth of a company's common stock based on recent transactions It is determined not by the company itself, but by the prices sellers are willing to accept and buyers are prepared to pay Consequently, there is no direct correlation between a company's market value and its book value; while book value reflects historical data, market value is dynamic and varies continuously in the stock market.
The market value of a stock is determined by its opening and closing prices, with the closing price reflecting the last transaction of the trading day and the opening price being the closing price from the previous session To accurately assess a stock's market value, the closing price is commonly used as a reference point for calculating the average stock price annually.
Market value is influenced by various internal and external factors of the company, making it the subject of study in this dissertation.
Factors Influencing Common Stock Prices
Study overview on Factors Influencing Prices of Stocks Listed on the Stock Exchange
Fama and French's (1992) research applied the APT model to the US stock market from 1963 to 1990, highlighting the influence of factors like book-to-market ratio, financial leverage, and P/E ratio on stock returns In contrast, Flannery and Protopapadakis (2002) examined various macroeconomic indicators, such as trade balance, housing starts, and the employment index, to evaluate their effects on US stock performance, concluding that GDP and industrial output are ineffective measures of economic activity in this context.
Al-Qenae et al (2002) conducted a study analyzing the impact of earnings per share (EPS), Gross National Product (GNP), interest rates, and inflation on stock prices in the Kuwait Stock Exchange from 1981 to 1997 The findings indicated a positive correlation between stock prices and both EPS and GNP, whereas a negative correlation was observed with interest rates and inflation.
Subsequently, Al-Tamimi et al (2007) investigated the factors affecting stock prices in the United Arab Emirates (UAE) stock market They collected price data for
A study analyzing 17 stocks from 1990 to 2005 revealed that earnings per share (EPS) had a strong positive influence on stock prices While money supply and GDP showed positive correlations with stock prices, these were not statistically significant In contrast, the consumer price index and interest rates exhibited negative correlations with stock prices, with the relationship between the consumer price index and stock prices being statistically significant Consequently, EPS and the consumer price index emerged as key factors impacting stock prices in this analysis.
In their 2012 study, Mehr-un-Nisa and Nishat examined how company financial indicators and macroeconomic factors affect stock prices on the Karachi Stock Exchange in Pakistan, employing the Generalized Method of Moments for their analysis.
A study analyzing data from 221 companies between 1995 and 2006 revealed a positive correlation between stock prices and several factors, including capital structure, market-to-book value ratio, earnings per share (EPS), and company size Additionally, macroeconomic factors such as GDP growth rate, money supply, and financial depth were found to positively influence stock prices In contrast, stock prices showed a negative correlation with interest rates and inflation rates.
A study by Uddin et al (2013) investigated the factors affecting stock prices in Bangladesh's financial sector, utilizing data from financial reports of 67 companies listed on the Dhaka Stock Exchange between 2005 and 2011 The regression analysis revealed a positive correlation between stock prices and key financial indicators, including Earnings Per Share (EPS), Net Asset Value (NAV), pre-tax profits, and the Price-to-Earnings (P/E) ratio.
Research indicates a significant relationship between GDP and stock market performance Chinzara's (2011) study highlights that GDP movements align with increases in stock prices in South Africa Similarly, Hsing et al (2012) emphasize the critical short-term synchronization between GDP and stock market indices in Poland.
Research by Zeytinoglu et al (2012) indicates that earnings per share (EPS) positively influences stock returns, particularly evident with a one-quarter lag Similarly, Idawati and Wahyudi (2015) found that in the coal mining sector, an increase in EPS correlates with a rise in stock prices on the Indonesia Stock Exchange.
Raza et al (2016) conducted a study on the firm-specific factors influencing share prices in Pakistan's automobile sector, focusing on the impact of the price-to-earnings (P/E) ratio and return on equity (ROE) on stock prices.
Pakistan The results indicated a positive, statistically significant relationship between P/E, ROE, and stock prices
Eita's 2012 study examined the influence of macroeconomic factors on the prices of listed stocks in the Namibian stock market, utilizing time-series data from 1998 to 2009 The research revealed a positive correlation between stock prices, returns, and dividends, challenging previous findings Additionally, it found that GDP, exchange rates, and money supply also had a favorable correlation with the prices of listed stocks.
Research by Hunjra et al (2018) highlights that post-tax profit and earnings per share (EPS) positively influence stock prices Similarly, Khan's study (2012) on the chemical and pharmaceutical industry in Pakistan found that dividends, EPS, and post-tax income significantly affect stock prices, indicating that both dividends and post-tax income tend to move in tandem with stock price fluctuations.
A study conducted by Murniati (2016) examined the influence of capital structure, company size, and profitability on the stock prices of food and beverage companies listed on the Indonesia Stock Exchange Utilizing financial leverage, return on assets (ROA), return on equity (ROE), and after-tax profit, the research found that ROA has a statistically significant and positive impact on stock prices.
In his 2011 study, Nguyen Huu Tuan explored the impact of macroeconomic factors on the Vietnamese stock market, specifically analyzing the VN-Index from 2005 to 2010 Utilizing VECM and ECM models to assess both long-term and short-term relationships, the findings revealed a positive correlation between M2 and the number of securities, while indicating a negative correlation with the overall performance of the Vietnamese stock market.
Meanwhile, the research by Than Thi Thu Thuy and Vo Thi Thuy Duong
Research findings on Vietnam's Consumer Price Index (CPI) show contrasting conclusions: while a 2015 study highlighted a negative impact, earlier work by Phan Thi Bich Nguyet and Pham Duong Phuong Thao in 2013 indicated a positive influence on CPI calculation methods, resulting in unusual CPI expressions Additionally, Bui Kim Yen and Nguyen Thai Son (2014) noted that the export-oriented economy and import restrictions contributed to positive economic impulses.
A study conducted by Phan Thi Bich Nguyet and Pham Duong Phuong Thao in 2013 analyzed the influence of various macroeconomic factors on the VN-Index, the market price index of the Ho Chi Minh City Stock Exchange, covering data from July 2000 to September 2013.
Stock Indices
The stock price index is an indicator that reflects the fluctuations of stock prices over time Similarly, the stock price index reflects changes in stock prices over time
Countries worldwide utilize five primary methods for calculating stock price indices: the Passcher method, the Laspeyres method, the Fisher price index method, the simple arithmetic mean method, and the geometric mean method.
The Passcher method is a widely used stock price index that calculates a weighted average price, utilizing the number of securities listed during the calculation period as its quantity weight The outcome of this method is influenced by the composition of the quantity weight throughout the calculation period.
The formula for calculation is as follows:
Ip: Passcher price index p : price at time t pₒ: price at base period
In the price index calculation, the quantity at the calculation period is represented by \( q \), while \( i \) denotes the stock participating in the index The total number of stocks included in this calculation is referred to as \( n \).
The KOSPI (South Korea), S&P 500 (USA), FTSE 100 (UK), TOPIX (Japan), CAC (France), and VNIndex (Vietnam) all apply this method
A rapid rise in the stock price index signifies a "hot" market, whereas a sustained decline indicates a "cold" market phase, making the stock price index a key barometer for assessing market conditions An unhealthy market is characterized by excessive growth followed by sharp declines, resembling an illness in need of treatment Ultimately, a healthy stock market index is fundamentally linked to companies' profitability.
DATA AND RESEARCH METHODS
Research Procedure
The research process undertaken by the author involves 7 steps:
Step 1: Identifying the research problem
The author investigates the factors influencing stock prices on the Vietnamese stock market by analyzing previous studies and recent price fluctuations.
This thesis investigates the factors influencing stock prices on the Vietnam Stock Exchange and assesses their impact The author offers recommendations for regulatory bodies, corporate leaders, and investors derived from the research findings.
Step 3: Theoretical framework and previous experimental studies
The author identifies relevant theoretical frameworks and previous studies to support the research process Identifying gaps in previous research will aid in the development of the thesis
This article examines the influence of six key factors on stock prices: Earnings Per Share (EPS), Return on Assets (ROA), Debt Ratio (DA), Price-to-Earnings Ratio (P/E), Inflation (CPI), and GDP Growth Rate Selecting these factors is essential for effective and precise data collection in financial analysis.
Step 5: Data synthesis and processing
Data related to 30 companies in the VN-30 group over 6 years from 2018 to
2023 is collected from financial statements, reputable sources, and previously published macroeconomic policies The collected data is processed and organized using Excel software for convenient model implementation
Step 6: Descriptive statistics and linear regression of variables
After gathering the essential data, a descriptive statistical analysis is performed to determine the minimum, maximum, and average values The author then develops linear regression models to analyze how these factors influence stock prices Each model is followed by tests to detect possible issues such as multicollinearity, variations in residuals, and autocorrelation.
Based on the final model, the author provides an explanation and offers appropriate recommendations for regulatory agencies, leadership, and investors to navigate stock price fluctuations.
Database
The data used by the author is collected annually over the period from 2018 to
In 2023, the author analyzed 180 observations by collecting microdata from 30 enterprises within the VN-30 group to identify market trends The data was obtained from credible secondary sources, including the General Statistics Office of Vietnam (www.gso.gov.vn), the International Monetary Fund (imf.org.com), and vietstock.vn.
The VN-30 group comprises 30 large-scale enterprises known for their high market liquidity, contributing approximately 60% of total market transactions This significant transaction value effectively reflects overall market trends.
From 2018 to 2023, the world experienced the profound effects of the COVID-19 pandemic, leading to notable economic fluctuations During this time, Vietnam faced significant challenges and impacts as well.
Microdata is derived from financial statements (BCTC) and their accompanying explanations from various companies, supplemented by data from vietstock.vn Additionally, the closing stock price data as of December 31 each year is obtained from fireant.vn.
- Macroeconomic data: Collected by the author from the information portal of the General Statistics Office gso.gov.vn.
Data Processing
The author compiles essential micro and macro data and inputs it into Microsoft Excel, where they encode the model's variables using the gathered information.
Table 2.1 Definition and Description of Variables in the Thesis
Closing price of shares on December 31st of each year
Net income per share/Total outstanding shares (+)
Ordinary shareholders' profit/Total assets (+)
Debt-to-Asset DA Liabilities/Total assets (-) Price-to-Earnin gs Ratio P/E
The market price of shares/Earnings per share (+) Control
Consumer Price Index CPI CPI growth rate over the years (-) Gross Domestic
Product GDP GDP growth rate over the years (+)
The author utilized Stata 15 software to conduct regression analysis, focusing on descriptive statistics and assessing multicollinearity among variables Additionally, the regression model's adequacy was evaluated using the R-squared coefficient, while various tests were performed to identify potential issues, including autocorrelation, heteroscedasticity, and multicollinearity tests.
Multicollinearity in regression models occurs when explanatory variables exhibit linear relationships, complicating coefficient determination In cases of perfect multicollinearity, coefficients cannot be estimated, while imperfect multicollinearity allows for estimates but reduces model efficiency This phenomenon can significantly impact test results and model reliability, making early detection crucial for effective modeling The Variance Inflation Factor (VIF) is a key metric for assessing multicollinearity; a VIF value below 2 indicates no multicollinearity, though a VIF below 10 is generally considered acceptable in practice.
A linear regression model has a crucial assumption that the error terms uі
In regression analysis, the assumption of homoscedasticity indicates that the residuals exhibit constant variance across all levels of the independent variable When this assumption is violated, it leads to heteroskedasticity, characterized by varying residual variance.
Heteroskedasticity affects the accuracy of OLS estimates, as the variances cannot be derived from standard OLS formulas Using these formulas in the presence of heteroskedasticity can result in misleading conclusions from t-tests and F-tests.
Autocorrelation refers to the correlation of the error term at time t (ut) with the error term at previous time periods, such as (t-1), and is frequently observed in both panel data and time series data.
Autocorrelation in a model can lead to inaccurate t-tests and F-tests, compromising the reliability of research findings To enhance the accuracy of the research model, it is crucial to identify and address autocorrelation when it occurs.
Research Model
The author employs a linear regression model to analyze the relationship between stock price (MP) and several independent variables, including Earnings per Share (EPS), Return on Total Assets (ROA), System Debt (DA), Price to Earnings (P/E), Inflation (CPI), and GDP Growth Rate (GDP).
MPt = β0 + β1EPSt + β2ROAt + β3DAt + β4PEt + β5CPIt + β6GDPt+ ɛ t
- β₁, β₂, β₃, β₄, β₅, β₆: The coefficients of the variables
The dependent variable used in this model is the closing price on December 31st of each year of the 30 listed stocks in the VN-30 list
The earnings per share (EPS)
Numerous studies have highlighted the earnings per share (EPS) metric, revealing a significant correlation between EPS and stock price volatility This research aims to further analyze and evaluate the extent to which earnings per share influences fluctuations in stock prices.
The hypothesis is formulated as follows:
Hypothesis 1:There is a positive relationship between EPS and stock price
Profitability on total assets (ROA):
The profitability of a business, measured by the Return on Assets (ROA) index, serves as a key indicator for investors assessing stock performance This study integrates ROA into the analytical model to explore its impact on stock prices Previous research has consistently demonstrated a positive correlation between profitability and stock valuation.
ROA and stock prices, as ROA affects investment decisions when assessing a company's business operations Thus, the hypothesis is formulated as follows:
Hypothesis 2:There is a positive relationship between ROA and stock price
Numerous studies have examined the relationship between a company's debt ratio and its stock price, revealing an inverse correlation; as a company's debt increases, its stock price tends to decrease To explore this relationship further, the author analyzes stocks on the Vietnam stock market from 2018 to 2023 by incorporating the debt ratio variable into the model, guided by the hypothesis that higher debt levels negatively impact stock prices.
Hypothesis 3:There is an inverse relationship between DA and stock price
The price-to-earnings (P/E) ratio serves as a vital tool for investors to evaluate the connection between a stock's current market price and its earnings per share Additionally, this ratio is utilized as an explanatory variable in the study to analyze the correlation between the P/E ratio and stock price dynamics.
Hypothesis 4: There is a positive relationship between P/E and stock price
Macroeconomic factors play a crucial role in influencing stock price volatility Previous studies have identified an inverse correlation between the Consumer Price Index (CPI) and stock price fluctuations Consequently, this research hypothesizes that changes in the CPI will affect stock price volatility in an opposite manner.
Hypothesis 5: There is an inverse relationship between CPI and stock price
GDP growth significantly influences the economy, especially impacting stock market prices Based on previous research findings, the author proposes a new hypothesis regarding this relationship.
Hypothesis 6: There is a positive relationship between GDP and stock price.
RESEARCH RESULTS
Economic Situation in Vietnam from 2018 to 2023
Fluctuations of the VN-Index
On April 10, 2018, the Vietnamese stock market achieved a historic milestone as the VN-Index soared to 1,211 points However, this peak was short-lived, with the index falling dramatically to 888 points by October 30, 2018 The year ended with the VN-Index closing at 892.54 points, reflecting a notable decline of 9.32% In a global context, Vietnam's drop ranked ninth among the largest declines from peak values.
Experts attribute the sudden decline in the Vietnamese stock market, despite ongoing economic growth, to the significant effects of the US-China trade war Recent statistics show a total of 2,182,327 trading accounts, with 2,144,735 held by domestic individual investors and 9,298 by foreign investors Although price indices have been negative, the market capitalization has increased by 12.7%, reaching a record high of 3,960 trillion Vietnamese dongs.
In 2019, the Vietnamese stock market initially grew in the first quarter but faced stagnation in the subsequent two quarters A notable decline occurred in mid-November, with the market dropping to 950 points, negatively impacting investor sentiment When compared to major regional and global markets, the performance of the Vietnamese stock market appeared less impressive, especially as Japan's Nikkei 225 index rose by 19.06% and Taiwan's TAIXE index surged by 23.12% by December 24th.
The VN-Index concluded 2019 at 960.99 points, marking a 0.42% decline, yet it experienced a total annual increase of 60.89 points, reflecting positive growth compared to other Southeast Asian markets In contrast, the HNX-Index climbed by 0.34% to finish at 102.51 points, and the Upcom-Index rose by 0.89%, closing at 56.56 points Overall, the total trading value across all three exchanges reached nearly 2,600 billion dongs.
In 2020, the stock market demonstrated remarkable resilience, closing with a growth of approximately 15% compared to the end of 2019, and earning a spot among the top ten best-performing global markets Despite the challenges posed by the COVID-19 pandemic, market liquidity surged to over 7,420 billion dongs per session, reflecting a 59.3% increase from 2019 This surge highlights the stock market's significant appeal during the year Additionally, November saw a record 41,203 new domestic investor accounts, the highest since the Vietnamese stock market's inception, contributing to a total of over 2.77 million accounts by the end of 2020, a 16.7% increase from the previous year.
In 2021, the stock market achieved a historic milestone, peaking at 1,500.81 points on November 25th, and closing the year with the VN-Index up 35.4% at 1,494.39 points on December 28th Market capitalization rose significantly, increasing by 46% from 2020 to reach 7,729 trillion dong, which is about 122.8% of the 2020 GDP This growth was fueled by a surge in liquidity, driven by a substantial influx of domestic investor funds By the end of the year, the number of investor accounts had risen to 4.08 million, reflecting a remarkable 47.3% increase compared to the end of 2020.
In 2022, the Vietnamese stock market initially upheld the impressive highs of 2021, but the VN-Index experienced a significant decline, reaching a low of 969.26 points on November 16th, making it one of the steepest decliners worldwide Despite this downturn, the market saw a record influx of new investors, with nearly half a million new accounts opened in some months, and experienced volatile fluctuations in numerous stocks throughout the year.
In 2021, the market witnessed an unexpected boom, defying the challenges posed by the pandemic, while 2022 brought a stark contrast as economies around the globe struggled with soaring inflation and stringent monetary policies implemented by central banks.
Despite Vietnam's economy showing signs of recovery, the VN-Index experienced a significant decline, diverging sharply from the positive trends observed in global stock markets.
According to sources, the VN-Index experienced significant fluctuations in
As of March 24, 2023, the VN-Index reached 1046.79, reflecting a 1.69% increase from the prior day However, by December 4, 2023, the VN-Index was fluctuating within two ranges, with forecasts suggesting that it would experience a sideways movement in the near term.
Experts predict that the VN-Index will fluctuate between 950 and 1,250 points in 2023, driven by a projected 12% growth in after-tax profits of listed companies Specifically, the index is expected to experience positive movements in the first half of the year, followed by a sideways trend around the 1,200-point mark in the second half.
On December 29, 2023, the final trading session of the year, the HOSE index closed slightly higher, while the HNX index experienced a minor decline Overall, the stock market delivered positive results throughout the year, with the VN index rising by 12.2% to close at 1,129.93 points, and the HNX index increasing by 12.53% to finish at 231.04 By year-end, the total market capitalization of the stock market reached nearly 6 quadrillion Vietnamese dong, marking a 14% increase from the start of the year, which translates to an increase of approximately 722 trillion dongs, or nearly 30 billion USD.
By January 2024, the VN-Index had risen to 1,283.09 Investors expect the market to experience a strong recovery in the final month of 2023 as the market receives positive supportive information
Chart 3 1 VN-Index developments in 2023
Inflation Rate Trends from 2018 to 2023
Chart 3 2 Inflation fluctuations in the period 2018 - 2023
In 2018, the Consumer Price Index (CPI) experienced an average increase of 3.54% from the previous year, successfully keeping inflation below the 4% target Food prices rose by 3.71%, contributing 0.17% to the CPI increase, largely driven by elevated rice prices during the Lunar New Year and a surge in export prices due to increased demand Additionally, pork prices also saw significant changes during this period.
In 2018, the Consumer Price Index (CPI) experienced a 0.44% increase compared to the previous year This rise in prices was influenced by various factors, although certain elements helped mitigate inflation Notably, the Ministry of Health implemented regulations that led to a decrease in healthcare service prices, which contributed to a 0.29% reduction in the overall CPI.
In 2019, Vietnam's Consumer Price Index (CPI) rose by just 2.79%, the lowest increase in three years, demonstrating the government's success in maintaining macroeconomic stability and keeping inflation below the National Assembly's target of around 4% From 2017 to 2019, inflation rates were consistently under 4%, recorded at 3.53%, 3.54%, and 2.79% This occurred alongside robust economic growth of 7.02%, which Deputy Prime Minister Vuong Dinh Hue described as "more meaningful" due to the low inflation environment.
Descriptive Statistics of Variables
Table 3 4 Descriptive statistics of variables
Variable Obs Mean Std.Dev Min Max
The results collected by the author from Stata 17 software indicate that the variable "MP" has an average value of 45437.57, with the highest stock price being
245940 while the lowest price is 2898, with a fairly large standard deviation of 39796.69 The VN-30 portfolio is quite diverse across various price segments, so the results are quite appropriate
The average Return on Assets (ROA) for the analyzed stocks stands at 5.11%, indicating that each 100 units of assets generates a post-tax profit of 5.11 units Over the last five years, Vietnam Dairy Products Joint Stock Company (VNM) achieved the highest ROA of 28.4 in 2018, driven by a 25%-30% revenue growth due to rising domestic milk demand Conversely, Vietjet Aviation Joint Stock Company (VJC) recorded the lowest ROA of -3.78 in 2022, attributed to a significant full-year loss of 2,171 billion dong, largely influenced by the ongoing impacts of the COVID-19 pandemic The standard deviation of 5.85 highlights the varying efficiency of business operations among companies during this challenging period.
In 2021, Vincom Retail Joint Stock Company (VRE) recorded the lowest debt ratio at 0.1907, contrasting with the highest ratio of 0.9585 observed at the Vietnam Investment and Development Bank in 2018 The average debt ratio across companies stands at 0.6941, with a standard deviation of 0.2404, indicating varied levels of financial leverage Over the years, companies have adopted different borrowing strategies tailored to their specific demands.
In 2021, Vingroup reported a significant net loss of 7,558,164 billion dong, resulting in a P/E ratio of -133.71, the lowest among its peers In contrast, Vietjet Aviation Joint Stock Company (VJC) boasted the highest P/E ratio in 2020 at 955.41 Over the past six years, the average P/E ratio for 30 companies was 30.43, with a notable standard deviation of 104.54 Additionally, the inflation rate, measured by the Consumer Price Index (CPI), influences stock prices, with an average CPI growth rate of 2.97% over the same period The highest CPI growth occurred in 2018 at 3.54%, while 2021 saw the lowest increase at just 1.84%.
The economic growth rate (GDP) plays a crucial role in influencing stock prices, with Vietnam experiencing a remarkable recovery in 2022, achieving a GDP growth rate of 8.02%, a significant increase from the 2.56% recorded in 2021 Despite the challenges posed by the Covid-19 pandemic, the Vietnamese economy demonstrated resilience by maintaining positive growth during this period.
From 2018 to 2023, the average earnings per share (EPS) for companies reached 3,529.106 dong, indicating the profit shareholders receive per share Notably, Vingroup Joint Stock Company (VIC) recorded the lowest EPS of -650 in 2021, while the highest EPS during this period was significantly greater.
In 2021, Vinhomes Joint Stock Company (VHM) reported a value of 10,789, accompanied by a substantial standard deviation of approximately 2,311.087 This considerable variation indicates notable disparities among companies over the past six years, primarily driven by the significant fluctuations caused by the COVID-19 pandemic As a result, business performance outcomes have varied considerably across different years and industries.
Regression Model Results
The author analyzed the correlations between key financial variables using Stata 17 software, focusing on stock price (MP), earnings per share (EPS), return on assets (ROA), debt ratio (DA), price-to-earnings ratio (P/E), inflation (CPI), and economic growth rate (GDP).
Table 3 5 Test for autocorrelation between variables
MP ROA DA PE CPI GDP EPS
Based on the software results, the correlation between the factors is deemed acceptable, all below 0.8 Therefore, all variables are retained for use in the model
The Return on Assets (ROA) ratio serves as a key indicator of a company's profitability potential, showing a positive correlation with stock prices Companies that demonstrate greater operational efficiency typically experience higher stock valuations Stock prices are significantly impacted by market supply and demand, along with investors' trading choices Before investing, investors assess a company's profitability metrics and benchmark them against industry peers These evaluations guide their buy or sell decisions, ultimately influencing market stock prices.
Rising profitability potential indicates a company's operational efficiency, prompting investors to use this information for stock trading Consequently, a higher Return on Assets (ROA) typically correlates with elevated stock prices, while a lower ROA is associated with decreased stock prices.
The findings reveal an inverse correlation between stock prices (MP) and debt ratios (DA) in companies A high debt ratio often indicates significant reliance on borrowed funds, raising concerns about repayment capacity Investors closely monitor this metric, as the ability to manage debt is as vital as profitability when evaluating investment opportunities.
The relationship between stock price (MP) and the Price-to-Earnings ratio (P/E) is positive, indicating that a high P/E ratio suggests investors are willing to pay more for each unit of earnings However, the P/E ratio should not be viewed in isolation; a low P/E does not automatically signify undervaluation, while a high P/E does not inherently indicate overvaluation.
The inflation rate negatively affects stock prices, as rising inflation prompts investors to shift their focus towards "defensive" assets like gold, savings accounts, and bonds This shift results in decreased demand for stocks, which typically leads to a decline in stock prices.
While GDP is generally believed to positively influence stock prices due to economic growth leading to increased income and investment demand, this study reveals an inverse relationship between GDP and stock prices.
The results indicate a positive correlation between the stock price (MP) and Earnings Per Share (EPS), supporting the theory that higher EPS makes companies more appealing to investors, which typically leads to an increase in stock price.
Table 3 6 Summary of results of 4 OLS and FEM REM GLS models
Variable OLS FEM REM GLS
To choose between the OLS model and the FEM model, the author considered Prob > F = 0.0000, which is less than 0.05 Therefore, the FEM model is more appropriate than the OLS model
Fixed-effects (within) regression Number of obs = 177
Group variable: Firm Number of groups = 30
R-sq: Obs per group: within = 0.1787 min = 3 between = 0.2919 avg = 5.9 overall = 0.2427 max = 6 corr(u_i, Xb) = 0.2629 Prob > F = 0.0001
MP Coef Std Err t P>|t| [95% Conf Interval] ROA 2299.889 775.4727 2.97 0.004 766.8329 3832.946
PE 15.33499 16.20228 0.95 0.346 -16.69581 47.36579 CPI -6459.005 2670.643 -2.42 0.017 -11738.68 -1179.327 GDP -973.632 674.0939 -1.44 0.151 -2306.27 359.0056 EPS_w -.4533848 1.20364 -0.38 0.707 -2.832898 1.926129 _cons 45868.79 24286.39 1.89 0.061 -2143.753 93881.32
Next, the author employs the Hausman test to choose between the FEM or REM model
The hypotheses of the test are:
H0: There is no correlation between the errors and the explanatory variables (choose the REM model)
H1: There exists a correlation between the errors and the explanatory variables (choose the FEM model)
Test: Ho: difference in coefficients not systematic chi2(4) = (b-B)'[(V_b-V_B)^(-1)](b-B)
The Stata software analysis yielded a P-value of 0.8854, exceeding the 0.05 threshold at the 5% significance level, indicating insufficient evidence to reject the null hypothesis (H0) Consequently, the Random Effects Model (REM) is selected for this analysis.
The author proceeds to test the assumptions of the REM model
Breusch and Pagan Lagrangian multiplier test for random effects
MP[Firm,t] = Xb + u[Firm] + e[Firm,t]
Test : Var(u) = 0 chibar2 (01) = 173.50 Prob > chibar2 = 0.0000
First, the author uses the command "xttest0" to test for heteroskedasticity with the hypotheses as follows:
H0: The model does not suffer from heteroskedasticity
H1: The model suffers from heteroskedasticity
Table 3 8 Testing the heteroskedasticity of the FEM model
The author tested for heteroskedasticity in the model and obtained a P-value < 5% significance level, thus accepting H1 and rejecting H0 The author concludes that the REM model exhibits heteroskedasticity
Next, the author uses the xtserial test to check for serial correlation
H0: The model does not suffer from serial correlation
H1: The model suffers from serial correlation
Wooldridge test for autocorrelation in panel data H0: no first-order autocorrelation
The return result P -value = 0.0000 < 0.05 confirms that the model has autocorrelation
So the REM model has heteroskedasticity and autocorrelation To overcome the defects of the REM model, the author uses the GLS model
Correlation: common AR(1) coefficient for all panels (0.6909)
Estimated covariances = 30 Number of obs = 177
Estimated autocorrelations = 1 Number of groups = 30
Estimated coefficients = 7 Obs per group: min = 3 avg = 5.9 max = 6
MP Coef Std Err z P>|z| [95% Conf Interval] EPS_w 1.700059 7502984 2.27 0.023 2295014 3.170617 ROA 1703.451 469.8222 3.63 0.000 782.616 2624.285
The regression analysis using the Generalised Least Squares (GLS) model reveals that stock price fluctuations are influenced by five key factors: Return on Assets (ROA), Earnings Per Share (EPS), Price-to-Earnings ratio (PE), Consumer Price Index (CPI), and Gross Domestic Product (GDP) In contrast, Debt to Assets (DA) does not significantly affect stock prices, as indicated by its P-value exceeding 5% Therefore, the established research model highlights these critical determinants of stock price changes.
The P-value of 0.023 indicates economic significance, as it is below the 5% significance level With a coefficient of 1.700059, this suggests that Earnings Per Share (EPS) positively affects stock prices, with a unit increase in EPS leading to a 1.700059 unit rise in stock price EPS is a crucial metric reflecting a company's profitability, especially highlighted during the COVID-19 pandemic, where it serves as a key indicator of financial health and growth potential A high EPS typically attracts investors, driving stock prices higher Research shows a positive correlation between EPS and stock prices, alongside influences from factors such as GDP, gold prices, and the VND/USD exchange rate during the pandemic, emphasizing EPS's role in investment decisions within the stock market.
The P-value of 0.000, which is below the 5% significance threshold, suggests that the hypothesis is economically significant Additionally, a coefficient of 1703.451 indicates a positive relationship between Return on Assets (ROA) and stock prices, meaning that for each unit increase in ROA, stock prices are expected to rise correspondingly.
Murniati's 2016 study, "Effect of Capital Structure, Company Size and Profitability on the Stock Price of Food and Beverage Companies Listed on the Indonesia Stock Exchange," reveals that Return on Assets (ROA) has a positive impact on stock prices A higher ROA increases the probability of a company's stock price appreciating in the market Additionally, stock prices are significantly affected by market supply and demand, reflecting investors' buying and selling decisions In making these decisions, investors evaluate the company's ROA and benchmark it against industry standards.
Price-to-Earnings Ratio (PE)
The P-value of 0.026, which is below the 5% significance threshold, indicates that the hypothesis holds economic significance With a coefficient of 47.41719, this suggests that an increase in the P/E ratio positively affects stock prices, specifically showing that for each unit rise in P/E, the stock price increases by 47.41719 units This finding supports the 2011 research by Nirmala et al., which demonstrated that P/E positively influences stock prices in India A high P/E ratio often correlates with a greater likelihood of stock price appreciation, making it a key metric for investors assessing a company's stock valuation However, it is crucial to consider the broader context, as the P/E ratio can be affected by factors such as growth rates, competitive advantages, and overall industry conditions.
A P-value of 0.000, which is below the 5% significance level, confirms the acceptance of the hypothesis The coefficient of -3537.877 indicates a negative correlation between the Consumer Price Index (CPI) and the stock prices of companies on the Vietnam Stock Exchange, suggesting that a 1-unit increase in CPI results in a decrease of 3537.877 units in stock prices This relationship highlights that high inflation can significantly impact the stock market negatively.
CONCLUSION AND RECOMMENDATIONS
Summary of Research Results
Companies often raise funds by issuing stocks to support their operations, and fluctuations in stock prices directly affect their ability to secure future financing A decline in stock prices can hinder a company's capacity to raise capital through new share issuances or other investment instruments, potentially leading to increased borrowing costs This situation can adversely impact the company's overall business performance Therefore, it is crucial to thoroughly analyze the factors influencing each company's stock price to build trust and facilitate capital raising efforts.
The primary goal of the study is to examine the 180 observations and the variables affecting the stock prices listed on the Vietnam Stock Exchange between
The VN30 stock group, which includes selected stocks, was analyzed in a study comparing data from 2018 to 2023 The research focused on two macroeconomic variables and five microeconomic indicators: Gross Domestic Product (GDP), price-to-earnings ratio (P/E), return on assets (ROA), consumer price index (CPI), and earnings per share (EPS).
The author utilized various regression models, including Pooled Partial Least Squares (PLS), Fixed Effects Model (FEM), Random Effects Model (REM), and Generalised Least Squares (GLS), identifying the GLS model as the most effective for addressing the FEM model's heteroscedasticity issue From 2018 to 2023, the GLS model indicates that five key factors—GDP, return on assets (ROA), price-to-earnings ratio (P/E), debt ratio (DA), and consumer price index (CPI)—will influence stock prices on the Vietnam Stock Exchange Notably, EPS, ROA, and P/E exhibit a direct correlation with stock price fluctuations, while GDP and CPI demonstrate an inverse relationship with stock prices.
Research plays a crucial role in shaping corporate governance, guiding financial investment strategies, and informing government macroeconomic policies In the context of the COVID-19 pandemic, the author has pinpointed key factors that impact stock values of companies over a six-year period, spanning from 2018 to 2023.
In 2023, the study's findings enhanced investors' comprehension of how macroeconomic and internal factors influence stock prices, providing insights into potential outcomes and aiding in the development of successful investment strategies.
Existence of research
Businesses' stock prices are influenced by a range of internal and external factors, making it essential for managers to identify and assess these elements to mitigate potential declines that could negatively affect operations While the research on "Factors Affecting Stock Prices Listed on the Vietnamese Stock Market" has yielded valuable theoretical and practical insights, certain unresolved issues remain within the study.
This study analyzes financial data from thirty businesses in the VN30 group over a six-year period (2018-2023) to explore factors influencing stock prices on the Vietnam Stock Exchange While it offers insights into these influences, the limited timeframe may not fully capture their impact on stock values, and results could differ with an extended period Additionally, focusing solely on the VN30 group means that findings may vary if other stocks are considered in future analyses.
The dissertation does not explore crucial factors influencing stock prices, including interest rates and the prices of gold and oil These limitations highlight opportunities for future research, providing a foundation for more comprehensive studies that can address these gaps and enhance the overall completeness of the research.
1 VN-Index developments in 2023
Inflation Rate Trends from 2018 to 2023
2 Inflation fluctuations in the period 2018 - 2023
In 2018, the Consumer Price Index (CPI) experienced an average increase of 3.54% from the previous year, successfully keeping inflation below the 4% target Food prices rose by 3.71%, contributing 0.17% to the CPI increase, largely driven by elevated rice prices during the Lunar New Year holiday and a surge in rice export prices due to high demand from other countries Additionally, pork prices also saw an increase during this period.
In 2018, the Consumer Price Index (CPI) experienced a 0.44% increase compared to the previous year, influenced by various price hike factors However, certain elements helped to mitigate inflation, notably a decrease in healthcare service prices mandated by the Ministry of Health, which contributed to a 0.29% reduction in the CPI.
In 2019, Vietnam's Consumer Price Index (CPI) rose by only 2.79%, the lowest increase in three years, demonstrating the government's success in maintaining macroeconomic stability and controlling inflation below the National Assembly's target of around 4% For three consecutive years from 2017 to 2019, inflation rates were kept under 4%, recorded at 3.53%, 3.54%, and 2.79% Amidst a robust economic growth rate of 7.02%, Deputy Prime Minister Vuong Dinh Hue highlighted that such growth is considered "more meaningful" due to the low inflation environment.
In 2020, the COVID-19 pandemic significantly disrupted global growth across various sectors, impacting Vietnam's production and international trade The General Statistics Office reported a 0.1% increase in the Consumer Price Index (CPI) in December compared to the previous month, and a 0.19% rise from the same period the prior year, highlighting the economic challenges faced during this unprecedented time.
2020, the CPI increased by 3.23% compared to 2019
In December, the Consumer Price Index (CPI) rose by 0.1%, driven by increases in domestic fuel, gas, and rice prices, which mirrored global trends, along with heightened consumer demand as the year ended, according to Ms Do Thi Ngoc, Head of the Price Statistics Department at the General Statistics Office The government played a crucial role in controlling inflation through support packages for businesses and workers, implementing measures such as electricity price reductions, price increase controls, and ensuring a balanced supply and demand for pork As a result of these efforts, inflation was successfully kept below 4% in 2020.
In 2021, despite rising global inflation and increasing costs for raw materials and transportation, Vietnam's average Consumer Price Index (CPI) rose by only 1.84%, the lowest increase in six years and in line with the National Assembly's targets, highlighting effective inflation management in the country.
In 2022, global inflation reached unprecedented heights, yet Vietnam maintained relatively low inflation rates The average Consumer Price Index (CPI) for the year rose by just 3.15% compared to 2021, falling below the National Assembly's target of approximately 4%.
In 2023, the Consumer Price Index (CPI) experienced a notable increase of 4.89% in January, indicating substantial inflationary pressure This pressure lessened over the year, with the inflation rate decreasing to 2% by June before rising again to 3.58% in December Ultimately, the average inflation rate for 2023 was 3.25%, aligning with the target established by the National Assembly.
The achievement is a result of proactive measures taken throughout the year, including lowering loan interest rates, stabilizing the foreign exchange market, and promoting public investment capital disbursement Key initiatives included implementing credit support packages for various industries, reducing the value-added tax from 10% to 8% for select goods and services starting July 1, 2023, and cutting environmental taxes on aviation fuel Additional efforts involved tax exemptions and reductions, support for enterprises, extending tourist visas, and addressing challenges in the corporate bond and real estate markets, along with advancing social welfare initiatives.
In 2023, Vietnam effectively controlled inflation, with no significant fluctuations in the market for essential goods and a stable supply The average prices of gasoline and diesel fell by 11.02% compared to 2022, and gas prices decreased by 6.94%, aligning with global price trends and contributing to reduced inflationary pressure.
3 Fluctuations of GDP in the period 2018 - 2023
The GDP growth rate in 2018 was recorded as the highest in 10 years since
In 2008, the government's timely and effective solutions contributed to an overall growth rate of 7.08%, as reported by the General Statistics Office The agriculture, forestry, and fisheries sector experienced a growth of 3.76%, contributing 8.7% to the total growth The industry and construction sector grew by 8.85%, making up 48.6% of the overall growth, while the service sector increased by 7.03%, accounting for 42.7% Notably, the agricultural sector showed a recovery trend with a growth rate of 2.89%, the highest in seven years since 2012 Additionally, the fisheries sector added 0.22 percentage points with a growth rate of 6.46%, and the forestry sector contributed 0.05 percentage points with a growth rate of 6.01%.
In 2019, Vietnam's GDP grew impressively by 7.02%, surpassing the National Assembly's target of 6.6% to 6.8%, showcasing the effectiveness of timely government policies Although this growth was slightly lower than the 7.08% seen in 2018, it outperformed the growth rates from 2011 to 2017 The agriculture, forestry, and fisheries sector expanded by 2.01%, contributing 4.6% to overall growth, while the industry and construction sector surged by 8.90%, contributing 50.4% Additionally, the service sector grew by 7.3%, accounting for 45% of the total growth.
In 2020, Vietnam achieved a GDP growth rate of 2.91%, the lowest in a decade, yet this positive outcome amidst the COVID-19 pandemic was a significant success, positioning the country among the highest global growth rates This achievement highlights the effectiveness of the government's strategies in managing the pandemic while focusing on socio-economic development.
The agriculture, forestry, and fisheries sector contributed 13.5% to the economy with a growth rate of 2.68%, while the industry and construction sector accounted for 53% with a growth rate of 3.98% The service sector also contributed significantly, representing 33.5% with a growth rate of 3.98% However, the pandemic had a devastating impact on the commerce and service sectors, particularly freezing the aviation and tourism industries, which severely hindered overall economic growth.
The Gross Domestic Product (GDP) for Q4 2021 is projected to rise by 5.22% year-over-year, surpassing the 4.61% growth rate of 2020 but falling short of the growth rates seen in Q4 from 2011 to 2019 In detail, the agriculture, forestry, and fisheries sectors grew by 3.16%, the industry and construction sectors by 5.61%, and the service sector by 5.42%.
In 2021, final consumption saw a rise of 3.86% compared to the previous year, while asset accumulation grew by 3.37% Additionally, exports of goods and services experienced a significant increase of 14.28%, and imports rose by 11.36%.
In 2021, the estimated GDP growth rate is 2.58%, reflecting a quarterly performance of 4.72% in Q1, 6.73% in Q2, a decline of 6.02% in Q3, and a recovery of 5.22% in Q4 The economy faced significant challenges due to the severe impact of Covid-19, particularly in the third quarter when key sectors were forced to adopt extended social distancing measures to curb the virus's spread.
2.9%, contributing 13.97% to the total value-added growth rate of the entire economy; the industry and construction sector increased by 4.05%, contributing 63.80%; and the service sector increased by 1.22%, contributing 22.23%
In 2022, Vietnam's economy experienced a robust recovery, with a GDP growth rate of 8.02%, marking the highest increase in 12 years The agriculture, forestry, and fisheries sector contributed 5.11% to GDP growth at a rate of 3.36%, while the industry and construction sector accounted for 38.24% with a growth rate of 7.78% The service sector led the way, contributing 56.65% with a growth rate of 9.99% The total GDP at current prices reached approximately 9,513 trillion dong (409 billion USD), resulting in a GDP per capita of 95.6 million dong (4,110 USD), which reflects a rise of 393 USD from 2021.
In the fourth quarter of 2023, the Gross Domestic Product (GDP) is projected to grow by 6.72% year-over-year, surpassing growth rates from the same period in 2012-2013 and 2020-2022 This upward trend continues from earlier quarters, with increases of 3.41% in Q1, 4.25% in Q2, and 5.47% in Q3 Key sectors driving this growth include agriculture, forestry, and fisheries, which rose by 4.13% and contributed 7.51% to total economic growth; industry and construction, which increased by 7.35%, contributing 42.58%; and the service sector, which grew by 7.29%, contributing 49.91% In terms of GDP utilization, final consumption grew by 4.86%, accounting for 53.18% of economic growth, while asset accumulation rose by 6.21%, contributing 44.18% Additionally, exports of goods and services increased by 8.68%, imports by 8.76%, and the trade balance contributed 2.64%.
In 2023, the GDP is projected to grow by 5.05%, marking a significant increase compared to the growth rates of 2.87% in 2020 and 2.55% in 2021 Analyzing the total value-added growth across sectors, agriculture, forestry, and fisheries saw a rise of 3.83%, contributing 8.84% to the economy Meanwhile, the industry and construction sector experienced a growth of 3.74%, contributing 28.87%, and the service sector led with a 6.82% increase, accounting for 62.29% of the total economic contribution.
Table 3 4 Descriptive statistics of variables
Variable Obs Mean Std.Dev Min Max
The results collected by the author from Stata 17 software indicate that the variable "MP" has an average value of 45437.57, with the highest stock price being
245940 while the lowest price is 2898, with a fairly large standard deviation of 39796.69 The VN-30 portfolio is quite diverse across various price segments, so the results are quite appropriate
The average Return on Assets (ROA) for these stocks is 5.11%, indicating that for every 100 units of assets, the companies generate a profit of 5.11 units after tax Notably, Vietnam Dairy Products Joint Stock Company (VNM) achieved its peak ROA of 28.4 in 2018, driven by a 25%-30% revenue increase due to rising domestic milk demand Conversely, Vietjet Aviation Joint Stock Company (VJC) recorded the lowest ROA of -3.78 in 2022, attributed to a significant loss of 2,171 billion dong in its consolidated financial statements, largely impacted by the ongoing effects of the COVID-19 pandemic The standard deviation of 5.85 highlights the varying efficiencies in business operations among companies during this challenging period.
In 2021, Vincom Retail Joint Stock Company (VRE) reported the lowest debt ratio at 0.1907, contrasting sharply with the highest ratio of 0.9585 recorded by the Vietnam Investment and Development Bank in 2018 The average debt ratio across companies stands at 0.6941, accompanied by a standard deviation of 0.2404 This variation indicates that companies experience differing levels of financial leverage, influenced by their unique borrowing strategies that evolve over time in response to market demands.
In 2021, Vingroup reported a significant net loss of 7,558,164 billion dong, resulting in the lowest Price-to-Earnings (P/E) ratio of -133.71 In contrast, Vietjet Aviation Joint Stock Company (VJC) achieved the highest P/E ratio of 955.41 in 2020 Over a six-year period, the average P/E ratio for 30 companies was 30.43, with a notable standard deviation of 104.54 Additionally, the inflation rate, as indicated by the Consumer Price Index (CPI), influences stock prices, with an average CPI growth rate of 2.97% during the same period The peak CPI growth rate occurred in 2018 at 3.54%, while 2021 saw the lowest increase at just 1.84%.
The economic growth rate, or GDP, plays a crucial role in influencing stock prices In 2022, Vietnam experienced a remarkable GDP growth rate of 8.02%, a significant recovery compared to the 2.56% growth recorded in 2021, which was the lowest in recent years Despite the challenges posed by the Covid-19 pandemic, the Vietnamese economy demonstrated resilience with positive growth.
Between 2018 and 2023, the average earnings per share (EPS) for companies reached 3529.106 dong, indicating the profit each shareholder receives Notably, Vingroup Joint Stock Company (VIC) recorded the lowest EPS at -650 in 2021, while the highest EPS during this period remains unspecified.