The Vietnam stock market has fallen to its lowest level in two and a half months, pressured by rising interest rates and foreign selling. As deposit rates increase, the influx of funds into the stock market has decreased, raising concerns about forced selling due to growing margin loan burdens.
On October 12, the VN Index closed at 1,720.98, down 14.11 points (0.81%) from the previous trading day, marking its lowest closing level since July 29 (1,704.68), according to local media including VnExpress.
Four stocks related to VinGroup saw significant declines, dragging down the index. VinGroup (VIC) alone lowered the VN Index by more than 10 points, while its real estate subsidiary, Vinhomes (VHM), contributed approximately 4 points to the overall drop.
However, the performance of individual stocks varied. On the Ho Chi Minh Stock Exchange, 154 stocks rose, outpacing the 148 that fell. Yuanta Securities Vietnam noted that while there was confirmed demand for bargain hunting, it did not spread enough to drive a market-wide rebound. Trading volume continued to decline, with the Ho Chi Minh Stock Exchange recording about 13 trillion dong (approximately $670.8 million), half the level of the previous trading day. Foreign investors have recorded net selling for 14 consecutive trading days, offloading around 4 to 5 million shares each of major companies like PNJ and VIX Securities.
The weakness in the Vietnam stock market is attributed to changes in investors' fund management due to rising interest rates. Analysts suggest that as deposit rates rise, investors are more inclined to choose bank deposits over the risks associated with stock investments.
SGI Capital, a Vietnamese asset management firm, recently reported that high deposit rates are hindering the influx of new investment funds into the stock market. It pointed out that investors who entered the market during a low-interest environment are now experiencing disappointment and anxiety. SGI Capital warned, "If deposit rates continue to rise, some investors may leave the stock market, leading to a chain reaction of forced selling."
Indeed, market liquidity has significantly contracted. According to Tien Phong Securities (TPS), the VN Index fell 3.47% in September, with average daily trading volume decreasing by 6.41% to 13.295 trillion dong (approximately $686 million). Long Viet Securities (VDSC) also reported that trading volume hit its lowest level in the past 12 months during the same period.
Vietnam's recent upgrade to secondary emerging market status by FTSE Russell has not translated into improved investor sentiment. Despite this upgrade on September 21, foreign selling and domestic investors' wait-and-see approach persisted. In September, net foreign selling reached approximately 48.3 trillion dong, nearly three times the previous month's figure, marking nine consecutive months of net selling.
Additionally, the high level of margin loan balances raises the risk of cascading sell-offs due to falling stock prices. If the value of stocks purchased with borrowed funds declines, investors may need to provide additional collateral or sell their holdings. SGI Capital explained that if this situation occurs simultaneously across multiple accounts, it could lead to a vicious cycle of forced selling and further declines.
Sector declines have been widespread. According to Tien Viet Securities (TVS), only five out of 19 sectors saw gains last month. The financial services sector fell by 10.8%, while real estate and banking dropped by 4.4% and 2.2%, respectively. SGI Capital raised concerns that funding pressures may persist into the fourth quarter. As the year-end approaches, the demand for loan repayments and investment fund settlements increases, suggesting that if deposit rates rise further, investors may prioritize cash holdings and deposits over stocks.
However, a sharp decline in stock prices does not necessarily mean a loss of investment appeal for all stocks. SGI Capital emphasized that the selling pressure due to debt burdens could present opportunities for long-term investors, but cautioned against assuming that stocks have become sufficiently cheap simply because prices have fallen significantly. Some brokerage firms predict that if the key support level of 1,720 is breached, the index could drop to around 1,670.
* This article has been translated by AI.
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