Although quarterly earnings reports are always a factor that props up the stock market in the short term, third-quarter results in particular, as seen in previous years, do not give too much impetus since businesses tend to save the best for the fourth quarter.

Q3 business results fuel market recovery momentum After a turbulent start earlier this month, the stock market rebounded from October 9 to 13, with the VN-Index surging by 27 points, equivalent to a 2.3% increase. As we enter the peak period for Q3 earnings reports, this could be a favorable factor for the market. In its October strategic report, Viet Dragon Securities Corporation (VDSC) predicted that the profits of most industry groups in the third quarter of 2023 would improve compared to the second quarter. This trend aligns somewhat with the recovery in economic and trade activities, as per data from the General Statistics Office. Specifically, sectors like oil and gas, pharmaceuticals, and technology are expected to achieve double-digit growth in after-tax profits. Analysts believe that since the figures in the second half of 2022 were modest, the profits of listed companies are likely to pick up from the third quarter of this year. Additionally, government and State Bank of Vietnam (SBV) policies promoting public investment, reducing value-added tax, and lowering interest rates are expected to have a positive impact on business results. Recent macroeconomic data supports these expectations. The manufacturing sector, in particular, is showing signs of significant recovery and is expected to accelerate in the remainder of the year. This is due to the year-end shopping season in the U.S. and the EU, along with a sharp decrease in unsold products in the U.S. Meanwhile, domestic consumer demand continues to grow, with total retail sales of goods and services estimated at VND1.55 quadrillion in the third quarter, rising 1.9% over the previous quarter and 7.3% year-on-year. The securities sector is also expected to see substantial growth, thanks to positive developments in the stock market during the third quarter and a significant surge in trading volume. Conversely, certain industry groups, particularly banking, face the risk of a downturn. Despite lower interest rates stabilizing lenders' input costs and alleviating pressure on their net interest margins (NIM), concerns about soaring bad debt and provisions for credit losses could impact banks' profits this year. Banking, which represents a significant portion of the overall index, is undoubtedly affecting the stock market's strength as it weakens. Moreover, while periodic reports on business performance are typically seen as catalysts for short-term market support, Q3 results are often downplayed in previous years, as companies tend to save major positive announcements for the fourth quarter. Unfavorable macroeconomic factors impact stock market recovery From a macroeconomic perspective, the stock market is still grappling with several factors that are impeding its recovery. The most recent concern is the Israel-Hamas war, which poses a threat to financial markets worldwide. As a result of these uncertainties, risky investment channels like the stock market are under downward pressure, while safe assets such as gold and basic commodities like energy and food have experienced significant price increases in recent days. There is widespread concern that inflation may make a comeback, disrupting the monetary policies of many countries. Previously, it was expected that these policies would shift from tightening to loosening in the near future. Oil prices were forecasted to possibly reach triple digits by the year's end. However, if the ongoing military conflict spreads to other economies in the Middle East, which is the world's center of oil drilling and export, oil prices could rise even more substantially, reaching the predicted US$150 per barrel as anticipated by Bloomberg Economics in the event of Iran joining the conflict. Vietnam’s inflation, though still kept in check, will probably come under pressure at any time as commodity prices on the international market are once again rising. The consumer price index (CPI) in September was 1.08% higher than in the preceding month, which is a fairly big increase, since certain localities are putting up tuition fees according to the roadmap set out by Decree 81/2021/ND-CP, coupled with a surge in the prices of rice, gasoline, and gas at home in response to the changes in the world prices, plus the escalation in housing rents. In the nine months of 2023, CPI grew 3.16% against the same period last year, with core inflation up 4.49%. Meanwhile, the exchange rate remains one of the factors exerting pressure on the stock market. Although the SBV since late September has constantly put Treasury bills on offer to absorb idle Vietnamese currency funds, in an attempt to narrow the gap in interest rates between the dong and the U.S. dollar in the interbank market so as to discourage speculation, the overnight interest rate for the dong, having hovered above 1% for a short period of time, on October 13 fell back to only 0.35%. Vietnam's inflation is currently under control, but commodity prices on the international market are once again on the rise. As a result, the exchange rate has resumed its upward trajectory since October 16, following a decline during the first half of October. It is worth noting that with the recent spike in gold prices, there is a possibility that the exchange rate could face further pressure in the near future, as gold and the U.S. dollar have historically had a correlated relationship. Given this situation, many investors believe that the VN-Index will require more time for correction and is likely to find stronger support at the 1,060-1,070 point range before it begins an upward trend once again. However, since deposit rates have dropped to new lows and savings placed in banks during periods of high interest rates are nearing maturity, there is a source of capital waiting for an opportunity to re-enter the market. A correction that lowers market valuations to an attractive level could present such an opportunity.