BỘ TÀI CHÍNH

UNIVERSITY OF FINANCE AND MARKETING

COURSE IP18

NAMES OF STUDENTS:
DU TUYẾT NHI (LK19000093)
NGUYỄN THỊ BÍCH TRÂM (1821002410)
PHẠM HẢI MỴ (1821002974)
THÁI LÝ MINH THÙY (1921006643)

Assignment
THE IMPACT OF COVID-19 ON
VIETNAM’S STOCK MARKET
TUTOR: PHAN THU HIỀN

At the end of 2019, an unpredicted illness named coronavirus disease 2019

(COVID-19) has spread internationally. Wuhan, a central city in China, announced the
first case of COVID-19 in December 2019. On 3 January 2020, 44 cases of viral
pneumonia with an unknown cause were confirmed by the Wuhan Health Committee.
The World Health Organization (WHO) released its first global warning on COVID-
19 on 30 January 2020. On 11 March 2020, as the number of confirmed cases rose
globally, the WHO declared it as a pandemic. So far, the People's Republic of China,
Italy, South Korea, France, Spain, Germany, Japan, and the United States of America
is the nations with the highest number of confirmed cases in the world. Many
countries have adopted the principle to deter the transmission of the new epidemic,
such as banning movement, demanding social distances, and closing schools, pubs,
restaurants, and other businesses.

As Covid-19 expands worldwide in the first quarter of 2020, we find that the
worries of businesses related to the collapse of demand, increased volatility, and

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supply chain instability. The most relevant topics include capability decreases,
closures, and the health of workers. The spread of the new coronavirus (COVID-19)
has contributed to reductions in asset prices worldwide, rises in stock market
uncertainty, decreases in nominal interest rates, and, as expressed in real GDP, the
probability of contractions in economic activity. We can, therefore, clearly see that
COVID-19 had a negative and limited impact on the stock markets of other Asian
countries, particularly in the early stages of the epidemic in Vietnam. The pandemic
also sets the law for the rapidly growing Vietnamese economy. Pre-pandemic
forecasts indicate that Vietnam's GDP growth rate will reach 6.8 percent this year, but,
it has fallen to 0.36 percent in the second quarter of 2020 (a good number of pandemic
warnings, but the worst for the Vietnamese economy over the past 35 years). In the
first half of 2020, Vietnam's exports decreased by 1.1 percent from the previous year
to US$ 121.21 billion, and imports dropped by 3.0 percent to $117.17 billion,
resulting in a trade surplus of US$ 4.04 billion, according to the General Statistics
Office of Vietnam (Thuy, H. 2020).

Similar to the world stock market, the domestic stock market has undergone
volatile trading sessions in the first seven months of 2020. Notably, the market
continued to experience strong declines in March when the translation of Covid-19
tended to break out.

To investigate much more thoroughly these deep declines in the Vietnam stock
market, we will focus on the global stock market crash of 2020 first. The 2020 stock
market crash, also referred to as the Coronavirus Crash, was a major and sudden
global stock market crash that began on 20 February 2020 and ended on 7 April 2020.
However, it was not until the first half of March to mid-March that the world stock
market experienced its worst days (Amadeo, K., 2020). 

The severe stock market crash began on Monday, March 9, nicknamed Black
Monday I. On that day, the Dow fell 2,013.76 points to 23,851.02. It fell by 7.79%.
On March 12, the day which is labeled as Black Thursday witnessed the Down fall
2,352.60 points to 21,200.62. However, the most noticeable drop was on March 16,
nicknamed Black Monday II of 12-13% in most global markets. It lost 2,997.10 points
to close at 20,188.52 (Amadeo, K., 2020).

DJI Average on Black Monday I, Black Thursday and Black Monday II

The Vietnam stock market is no exception.

According to SSI Securities Corporation, before the Lunar New Year holiday, three
key features affect the stock market: Good business performances of local banks, net
foreign capital inflows, and fourth-quarter earnings reports.

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 The VN-Index led by banks like BID, CTG, and VPB soared. The market
capitalization of the banking sector totaled more than VND1,000 trillion (US$43.5
billion) on January 22, an increase of 8.6% over the end of 2019.

After five straight months of net selling on the Hochiminh Stock Exchange
(HOSE), foreign investors became net buyers. In fact, in the period between January
1, 2020, and January 22, 2020, they bought net up to VND2,100 billion (US$91
million). Notably, as for ETF flows, VFMVN30 was the most attractive fund to be
invested in during this time despite strong fluctuations after Tet. The net buying value
of VFMVN30 in January was nearly VND264 billion.

HOSE-listed companies full-year profit growth to 12.1% due to their fourth-quarter

profit’s increase (20.66%) over a year earlier. Profit after tax of the two largest sectors
by market capitalization, banking, and real estate, rose by 29.8% and 32.6%,
respectively.

 However, after the Lunar New Year break, the stock market of Vietnam has been
hit hard by the pandemic too. This negative impact on the stock market of Vietnam
could happen mainly because “Vietnam’s push towards international trade
connectivity in modern times has turned it into an essential global value-chain hub,
especially in the manufacturing sector” SSI Securities analysts said, “any major global
disruptions from other key suppliers such as China could pose a big threat to growth
here.” (Nguyen, K.G., 2020). To be more specific, let take the aviation and tourism
sector as an example, listed aviation and tourism stocks dropped dramatically due to
the coronavirus outbreak and the lockdown among many countries. Two big airlines,
Vietjet (VJC) on HOSE and Vietnam Airlines (HVN) on the Unlisted Public
Company Market (UPCOM), decreased by 7 per cent and 6 per cent, respectively.
Another example is the ground loss in several sectors such as real estate, securities,
information and technology, retail, oil and gas, agriculture, food and beverage,
construction material, logistics and seafood processing.

Besides, mounting concerns that trade disruptions caused by a surge in coronavirus

cases around the world will impose an impact on the Southeast Asian countries have
pushed the benchmark VN Index down over 6% since January 30. That is the world’s
worst plunge after Chinese shares dropping in the dramatic slide. The Vietnamese
gauge is down 9.4% from a November high and remains mired in a bear market that
began in 2018 (Nguyen, K.G., 2020).

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 Similar to the situation of the stock market in the world, the Covid-19 pandemic
also had a strong impact on the stock market of Vietnam. Notably, in March, when the
translation tended to break out in Vietnam and around the world, the Vietnamese stock
market continuously witnessed sharp decline sessions (the sessions on March 9,
March 11). Typically, on March 11 and March 12, the VN-Index fell 3.1% and 5.19%,
respectively, especially on March 9, the overall index dropped by 6.28%, a deep
decline. most since 2002. Therefore, only in March, the VN-Index fell by nearly 25%,
which is the month of record decline.

According to a report of The Hanoitimes, “Vietnam shares suffer deepest fall in 19

years on epidemic fears”. On March 9, Vietnamese shares plunged the foremost since
2001 because investors and traders strived to exit the markets for fear of the Covid-19
epidemic. (Minh Anh, 2020)

“The stock market is expected to continue experiencing strong corrections, while

the market bottom cannot be determined until there are clear signs of effective control
over the COVID-19 epidemic”, some market analysts said. In other words, “It is
difficult for the VN-Index to move positively during this period. The index may even
decrease further,” Hoang Thach Lan, head of Personal Banking Division at Viet
Dragon Securities Company shared.

The benchmark VN-Index of the Hochiminh Stock Trade (HoSE) was down by
6.28% to 835.49 – the most reduced since November 2017, causing a decrease of
about US$13 billion in showcase cap (Minh Anh, 2020).

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Source: Bloomberg

It is reported that on the March 9 HOSE, “368 tickers closed in negative territory,
14 stood still, and only 34 others managed to go north”. The 30 largest and most liquid
stocks, VN30 Index, dropped 6.35% to 782.85, with all the constituents ending in red
and 23 hitting the lower limits. Also, on the UPCOM Exchange, the UPCOM-Index
lost 5.32% while the HN-Index dived 6.44% (Minh Anh, 2020).

Main stock indexes at the close on March 9. Source: SSI

On March 11, the Covid-19 continued overcasting the stock market. According to
VNExpress news, the VN-Index reached its lowest point, which was down by 3.12
percent to 811.35 points. At the same time, the VN30-Index for the bourse’s 30
market caps dove further at 3.97 percent, with 28 stocks in the red and two keeping
their opening prices (Le, H., 2020).

In the retail sector, MWG of electronics store chain Mobile World and PNJ of
jewelry store chain Phu Nhuan Jewelry both fell 6.9 percent (Le, H., 2020).

In the beginning, MWG’s trading session was in green, but just under an hour after
when the Ministry of Health confirmed that Vietnam’s 35th Covid-19 positive patient
was an employee of a Mobile World store in central Da Nang city it plunged to the
floor price (Le, H., 2020).

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 “Other major losers included PLX of petroleum distributor Petrolimex, down 6.6
percent, POW of electricity generator PetroVietnam Power, 5.1 percent, ROS of real
estate developer FLC Faros, 6.6 percent, and BVH of insurance giant Bao Viet Group,
6.4 percent.” (Le, H., 2020).

In the summary of all of the information above, Covid-19 has overturned every
forecast about the Vietnam stock market. It hit the stock market greatly in the first
quarter and hurt the whole year of 2020.

As you know that the deep fall of stock in the first quarter of 2020 due to the effect
of the Covid pandemic, the stock market in Vietnam rises again and signs a strong
recovery positively after that. Lately in March and early in April, the good news
which was about controlling completely the COVID-19 epidemic, the solutions for
attracting the economy, and the agreement in pricing the global market gained back
the persuasion of investors. Therefore, Vietnam becomes one of the best markets in
the world which restores well when the COVID-19 is controlled.

During a month from March, VN-Index increased 16 gaining sessions and only
decreased in 3 sessions. Accordingly, the HoSE index accumulated over 107 points,
equivalent to an increase of more than 16.3%. As BSC’s statistics, VN-Index returned
to increase by 19.8% (to 17/04). The most attractive element in this recovery stage
was that cash of retail investors was surprisingly pouring into the market whereas
remote speculators remained net sellers. These may well be unused or experienced
investors returning to the market. They started to test and disburse strongly when they
saw a great reaction from the market. In any case, the cash stream of retail investors is
exceptionally difficult and restricted. When they reach the limit, they will take
benefits mostly, (Bizlive, 2020). And good advice which is the most satisfactory and
riskless for the investors at this time is investing in food and foodstuff industries.
(According to Mr. Bui Nguyen Khoa, head of Market Macro Group, Bank for
Investment and Development of Vietnam Securities JSC (BSI)). Also, being a
participant of the talk show about “the improvement of Vietnam’ stock market” at Ha
Noi (21/10), Mr. Le Duc Khanh – Director of Investment Capacity Development
Department of VPS Securities Company assumed that for a long time, while the
foreign investors maintained the net sell, domestic one bought very strongly.
Accordingly, Bui Hoang Hai – Director of Securities Offering Management
Department (SSC) said that in lately 2019, many businesses have programs in which
sell the securities for foreign partners. However, in this year, outside investors may
not enter Vietnam to investigate the market and missed numerous expansive share
issues. By contrast, some other countries happened capital withdrawal too much but
not in Vietnam mostly. In this sense, the outside investors still rate Vietnam’s stock
market at a high position in general and the improvement of the economy in the future
in particula, (Ha Loan, 2020).

The Financial Magazine – the information agency of the Ministry of Finance

(01/10/2020) shown that Vietnam’s stock market reached the top of the world’s
strongest rise in the third quarter. Vietnam's stock showcase (stock showcase) finished
September with all 3 records VN-Index, HNX-Index, and UPCoM-Index gaining

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compared to the past month. After the session on September 30, VN-Index stood at
905.21 focuses, up 2.98% separately. In this manner, the file speaking to Vietnam
stocks positioned 4th within the beat 10 most effective markets in September, fair
after Mongolia (4.27%), Turkey (4.06%), and Denmark ( 3.48%).

Although the fact that there's a more humble increase than in Eminent, the liquidity
in September has outperformed. The average exchanging volume in September on
HoSE comes to more than 352 million offers/sessions, corresponding to an increase of
23% compared to Eminent. The average exchanging esteem too expanded by 31% to
VND 6,644 billion. HoSE advertise cap as of September 30 reached 3.2 million
billion, up 2.94% compared to the conclusion of Eminent, identical to a supreme
increase of 91,722 billion dong (4 billion USD).

VN-Index movement in September. Unit: point.

It is undeniable that Covid-19 has significantly affected the financial market in

general and the stock market in particular. The rate of capital mobilization through
bonds come to 98% compared to last year, stocks reached 99%. But compared to last
year, the real sum of capital raised is as it were 61% of the last year. As mentioned
previously, the lack of foreign investment due to the disease, the constraint of
transportation and others lead to raise capital from international bond issues has
decreased significantly, but for a couple of businesses working within the monetary
division such as managing an account, securities, protections, the rest of generation
and trade, genuine domain was in inconvenience; SOE equitization is nearly
incomprehensible. Besides that, the epidemic also made a psychology of capital
preservation, a psychology of holding cash instead of stocks of investors. These
activities create negative mental impacts, making the residential stock market
troublesome.

On the other hand, when looking at the recent rate, Vietnam’s stock market has not
changed completely, even be better in comparison with lately 2019, the liquidity
growths more than 27%, the derivative market increases over 90%,… So, as you can
see, the market is not only good but better than expected as well. The greatest score is

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not the score recovery, but it appears a really strong internal force of domestic
investors. Foreign investors had a strong direct effect on Vietnam's stock market in
past years, but this year it did not depend on outside investors' developments.
Typically the huge bright spot. Moreover, the liquidity in 2020 has a mutation, as
follow, on average, the liquidity of the market reached 7,000 to 10,000 billion VND
per day is rarely, (Ha Loan, 2020).

Based on the predictions of professors, directors, or CEOs, The VN-Index can

reach 980-990 focuses, or indeed return to the 1,000 point check exceptionally before
long. We see a shining future for the stock market since the room for development is
exceptionally strong. In case following the force of advancement as Asian nations, the
improvement potential is huge. Investors have tall expectations for modern items that
are reasonable for more customers of the Vietnamese market. Also, the list which has
countries near to jump to a higher rank in the modern market – FTSE AND MSCI has
Vietnam. If Vietnam has a higher rank, increasing market reputation will attract
foreign capital inflows. And according to the FTSE’s standard, Vietnam applied 7/9
ones to upgrade to the category 2 developing markets. The rest standards if about the
payment cycle and “the rate of rarely failed transactions” due to the lack of
information for evaluating. About the exact time Vietnam is upgrading to a new rank,
Mrs. Ta Thanh Binh said that it depended on how the foreign investors feel about.
However, the economy may be positive within the long term, but stock lists regularly
come up short to reflect a 1-year viewpoint. This implies that although the fact that the
economic recovery demonstrates is the V shape, the showcase slant in 2020 is
impossible to be the V shape. A vital variable influencing the VN-Index's trend is the
outside cash flow. For example, the ETF, the cash in Vietnam sometimes is not since
Vietnam is truly exceptional, but basically, they distribute assets followed by a global
strategy. It is not certain that foreign cash flows will soon return even after the
epidemic is over. In addition, Donald Trump's defeat can make the US economic
outlook volatile, affecting emerging markets. In the opposite case, it is not certain that
the cash flow for EM will be better. Last but not least, Mr. Nguyen The Minh –
Analysis director of the Yuanta Stock Company showed 3 mains futures. First of all is
an optimistic scenario, in this case, the vaccine for COVID-19 will be tested and
released. The VN-Index can toward a reasonable area, between 778 and 810 points.
The second thing is the base scenario, in which vaccine for COVID-19 cannot be
released soon but financial markets and liquidity problems are solved by monetary,
and fiscal policy. In this situation, VN-Index can maintain unchanged, 672-692 points
and gradually progress to the fair value range 778-810 points. And the final scene is a
pessimistic scenario, it means that the vaccine for COVID-19 cannot be released soon
and financial markets and liquidity problems are not solved by monetary and fiscal
policy. With this one, the VN-Index may fall to 515-527 points (near the 2008 crisis
bottom), (Bizlive, 2020).

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