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Exchange rate pressure eases, creating favourable conditions for stocks, economic recovery
Exchange rate pressure eased in the third and early fourth quarters of 2024, leading to a favourable period for stocks, according to representatives from fund management companies, who also expressed optimism about the recovery of the economy and business growth.
Nguyễn Bá Huy, Investment Director of SSI Fund Management Company Limited (SSIAM), at the second Việt Nam Financial Advisors High-Level Forum in 2024. — Photo baodautu.vn
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At the second Việt Nam Financial Advisors High-Level Forum in 2024, Nguyễn Bá Huy, Investment Director of SSI Fund Management Company Limited (SSIAM), predicted that the exchange rate risk would be minimised as a result of recent reasonable intervention steps taken by the State Bank.
While there might still be some exchange rate pressures due to the delay in interest rate reductions by the US Federal Reserve (Fed) and increased import demand, Huy said that they should not be a major concern.
Regarding inflation, SSIAM's Investment Director also believed that it would not be a significant issue unless there were special geopolitical factors at play.
Based on the exchange rate and inflation foundation mentioned earlier, it would be difficult to find a reason to raise interest rates, especially as the time for the Fed to lower interest rates approaches. Even in case of an increase, interest rates would still remain low for an extended period.
"Interest rates are always a crucial factor impacting the stock market, influencing the allocation of capital flows into investment channels, as well as the business decisions of companies. I have faith in the low interest rate environment as it consistently supports economic and business growth. Domestic capital flows may increase once investors realise that interest rates are unlikely to rise significantly."
Huy also emphasised that the most important concern was the economy's ability to recover. Given the current macro environment, businesses in various industries were expected to experience positive growth. The increase in the index of industrial production (IIP) would be the initial signal to reflect this recovery, as the revival of industrial production would be followed by increased worker income and consumption demand.
Not only did the data published by the General Statistics Office support this view, but SSIAM's direct interactions with businesses from diverse industries also indicated an increase in orders, which in turn led to the restoration of production and domestic demand for the economy.
Echoing the sentiments of the SSIAM representative, Nguyễn Sang Lộc, the Operational Director and Portfolio Manager of Dragon Capital Việt Nam Investment Fund Management Company, agreed that central banks were nearing the end of the interest rate hike cycle after a prolonged battle against inflation. In major economies worldwide, the key issue was how to maintain a robust economy. After utilising interest rate tools to stabilise exchange rates for a period, Lộc expected Việt Nam to soon shift its focus towards supporting growth.
"In addition to macroeconomic factors, the most crucial aspect to monitor is business profits. We closely follow indicators that are often overlooked by many, such as electricity output, cargo flow, container traffic at ports, and purchase and sale invoices in retail chains. We have observed a recovery beginning in the third quarter of 2024, albeit at a slow pace. At present, all parties agree that the economy has entered the recovery process," Lộc said.
Based on estimates from the top 80 leading enterprises in Việt Nam, the after-tax profit growth in the first quarter was 15 per cent, spanning multiple industries.
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