As major central banks, especially the US Federal Reserve, hike interest rates in a bid to tame soaring inflation, markets are now worried stagflation could hit some countries.
International organisations continue to revise their forecasts for global economic growth in 2022 and 2023. Of which, the International Monetary Fund (IMF) lowered its forecast to 3.2 per cent for 2022 and 2.7 per cent for 2023, while the World Bank estimates global GDP growth will slow to 0.5 per cent in 2023.
The movements and complex and unpredictable geopolitical situations around the world, such as the Russia-Ukraine conflict, tensions between major economies, China’s zero-COVID, global supply chain disruptions, and rising commodity prices, weighed on global stock markets.
As of the end of October, MSCI’s broadest index of Asia-Pacific shares outside Japan dropped 21.98 per cent, Germany’s DAX index lost 16.63 per cent, South Korea’s KOSPI index fell 23.82 per cent, China’s Shanghai index edged down 19.89 per cent, Hong Kong’s Hang Seng index fell 36.48 per cent, while the US S&P500 index fell 18.15 per cent compared to the end of 2021.
On the domestic market, cash flow has also been affected by the changes in interest rates. Following the Fed’s continuous interest rate hikes, the State Bank of Vietnam (SBV) raised interest rates for the second time this year to control inflation and reduce external impacts.
Thereby, deposit interest rates at commercial banks have also increased, attracting cash flows back to the banking system and reducing the attractiveness of short-term securities investment channels. After the pandemic was brought under control, a part of the investment capital flows on the stock market shifted back to production and business activities.
Furthermore, the stock market increased significantly between 2021 and the first quarter of 2022.
With the emergence of numerous unfavourable factors, investors saw opportunities to profit, resulting in a strong selling force on the market.
Investors' sentiment was also negatively affected by the investigations and prosecutions of a number of large real estate enterprises related to violations in the issuance of corporate bonds, affecting cash flow in the market.
According to SSC, the domestic stock market's recent corrections were caused by investors’ cautious sentiment while facing uncertainties and less positive prospects in the world economy and politics and were in line with developments on the global stock market.
Under the direction of the Government and the Ministry of Finance, and in order to ensure a stable, sustainable, and transparent development of the Vietnamese stock market, the SSC has been implementing a number of measures.
Firstly, it has boosted the work of propaganda and provided official and accurate information on the policy, operating orientation, and situation of the macro-economy, stock market, and safety of the financial and monetary systems in order to stabilise investor sentiment and enhance transparency in the stock market.
SSC also strengthens inspection and supervision to enhance and strictly handle violations on the stock market, ensure the market’s safe and transparent operation, and protect the legitimate rights and interests of investors; it coordinates with investigative agencies in verifying and investigating serious violations on the stock market.
The commission will improve the management, supervision, and transaction mechanism for the private placement of corporate bonds in the market by submitting to the Government Decree 65/2022/ND-CP amending a number of articles of Decree 153/2020/ND-CP on private offering and trading of corporate bonds in the domestic and international markets.
Moreover, it comprehensively reviews the provisions of the Securities Law and guiding documents to immediately overcome inadequacies and obstacles, thereby restoring trust and ensuring the healthy, transparent, and sustainable development of the stock market.
Last but not least, it adjusts the final settlement price on the derivative expiration date, meaning that instead of ATC closing prices on the underlying market on the derivative expiration date, it is the average price in the last 30 minutes before the close of the underlying market.
Caution on owned bonds
Meanwhile, in light of recent scandals in the domestic bond market, the Ministry of Finance advised market participants to follow the law and pay attention to a few notes.
For bond issuers, with the principle that corporate bonds are self-borrowing, self-paying, and self-responsible for the efficiency of capital use, enterprises must be responsible for paying in full and on time the interest and bond principal and making commitments with investors.
On the other hand, it is the responsibility of service providers, consulting firms, issuing agents, depository agents, bond transferors, and other service providers to coordinate with the issuer and investors to ensure responsibilities in written contracts and reputation when offering services.
For investors, when an issuer experiences payment difficulties, investors can actively engage with the company and service providers to find a workable solution, protecting both investors’ and issuers’ interests.
As a result, investors must be careful to evaluate and classify the bonds they own in order to make the right choices and avoid acting on false rumours.
According to the ministry the corporate bond market still has potential thanks to the higher capital demand of enterprises for production and business in the future. Therefore, the Government’s view is to continue to develop a safe, healthy, and transparent operating market. VNS
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