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Monday, May 16, 2022

HSBC forecasts VN-Index will reach 1,850 points this year

The Saigon Times

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HCMC – HSBC Global Research has forecast that the VN-Index will reach 1,850 points in 2022 as the prospects of Vietnam’s stock market remain positive this year as well as in the long term.

HSBC welcomes the launch of the new market comprehensive trading and post-trade systems provided by the KRX which is expected to take place in 2022. The new technology will be capable of facilitating significant increases in trading volume and resolve system congestion.

The technology will also provide the infrastructure to launch new products such as intraday trading, sale of receivable shares and non-voting depositary receipts, which will attract new and increased foreign investment.

In order to increase the purchasing powers of foreign investors and set the stage for Vietnam to be upgraded to Emerging Market status, the authority has finalized a legal framework for the Central Counterparty (CCP) model, which is expected to be launched as soon as the new settlement and clearing systems go live in 2022.

Another important and long awaited development will be the removal of the mandatory cash prefunding requirement for buy trades via launch of the new settlement and clearing system under the CCP model.

The CCP model is planned to be launched alongside the new KRX systems and mean investors will no longer have to prefund their purchases. This should increase the purchasing powers of investors in general and foreign investors in particular, supporting Vietnam to attract more foreign investments.

Investable stocks and products are available for foreign investors

Despite the fact that Vietnam’s foreign ownership limits (FOL) has not been changed much, a quick look at the VN30-Index, which comprises 30 large-caps, confirms foreign investors have enough investable stocks to choose from.

Of the 30 stocks in the VN30, only five have reached foreign ownership limits, 13 stocks have market caps above US$5 billion and 12 trade at more than US$10 million a day.

Meanwhile, Exchange Traded Funds (ETFs) continue to help foreign investors gain exposure to companies that have reached foreign ownership limits. In 2021, local ETFs delivered average growth of 40% vs 24.7% for foreign ETFs.

Non-Voting Depositary Receipts (NVDRs) and Covered Warrants with underlying assets being indices offer investors further opportunities to earn profits from securities that are already at their foreign ownership limits.

“The new systems provided by the KRX will provide the platform that enables new trading opportunities such as intraday trading, sale of receivables, covered shortselling and securities borrowing and lending, which we hope will attract further new investment into the market,” said James Estaugh, Head of Securities Services at HSBC Vietnam.

Vietnam’s stock market experienced a record high net selling by foreign investors in 2021 valued at VND62,358 billion.

“However, we are confident that the foreign capital flows will return strongly in 2022 for good reasons. Apart from the favorable macro factors, Vietnam’s market has its own attractiveness to lure foreign investors. In fact, the foreign investors have undertaken net buying since the first few weeks of 2022,” said James Estaugh.

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