1571 the impact of macro factors on the stock market in viet nam masters thesis (FILE WORD)

Executive summaryThis essay focuses on the effects of inflation on the stock market in Vietnam, the causes ofinflation and its effects, and the short- long term market Vietnam Stock Mark

Dissertation submitted in partial fulfillment of the

Requirement for the MSc in Finance

Supervisor: Dr Tran Thi Xuan Anh

September 2018

THE IMPACT OF MACRO FACTORS

ON THE STOCK MARKET IN

VIETNAM

By Dinh Thanh Huyen ID: 17047720

Research proposal

- The research question: The stock market is quite young in Vietnam, but it has a

certain impact on the economy Over the years, there has been a lot of domestic andinternational economic and political turmoil, so it has made significant changes in themarket The integration and attraction of foreign investors is a positive sign for theVietnamese economy Although there have been a lot of researches and articles on theimpact of macro factors on the stock market, it seems to me that this is a very goodand practical subject assist Based on previous research, I will provide further analysis

of some of the hopeful contributions that can be made to the comments that will helpboost Vietnam's economy

- Research by others This is a topic that has been studied so much, so I have based on

previous research to base this analysis Before choosing the topic, I studied some ofthe previous highlights to make the basis for my own writing

- Research methods and data: In this study I used data on CPI, GDP, exchange rate,

gold price, VN Index from 2000 to 2018 for analysis These are typical macro

indicators of the Vietnamese economy The data I use are taken from the GeneralStatistics Office, the Securities and Economic Review

- Timescale: This article is made within 3 months This is not too long and not too

short for me to study the subject I hope I can spend as much time as possible to make

my dissertation the best

- Final format: My research consists of 5 parts In this essay I will analyze the stock

market, the stages of development, the research model, analysis of macro factors andits impact on the stock market in Vietnam Then give the comments, reviews

Executive summary

This essay focuses on the effects of inflation on the stock market in Vietnam, the causes ofinflation and its effects, and the short- long term market Vietnam Stock Market (VN-Index)and Inflation (Consumer Price Index CPI) In this essay I have used quantitative methods,regression models to evaluate and comment After all analyzes, it is clear that inflation has astrong impact on the stock market in both short and long term In short, the correction speed

is relative equilibrium slow, negligible In the long run, inflation and exchange rate

fluctuations are strong In contrast to the VN-Index, the interest rate also negatively affectedthe index, however, was weaker and the gold price was impacted along the VN-Index Based

on the results of the research, some solutions are proposed to contribute to the support

Vietnam's stock market develops stably and sustainably

In the Vietnamese market, changes in policies as well as macro factors often have a strongimpact (both positive and negative) on the stock market and the psychology of investors.Therefore, the study of the relationship between the macroeconomic factors and the volatility

of Vietnam stock market is very important

Table of content

Executive summary 4

CHAPTER 1: Introduction 8

Reason for choosing the topic 8

Overview of the main contents of the thesis: 8

Objectives of the study: 8

Research Issues: 8

Research subjects: 9

Research scope: 9

CHAPTER 2: Studies on the macro factors affecting the stock market in Vietnam 10

Literature review 10

Overview of Vietnam stock market 14

The macro Index 15

Gross National Product - GDP 15

Consumer price index - CPI 15

Inflation 16

Price of gold 18

The stages of development of the stock market in Vietnam 19

The period 2000-2005: Thetoddler stage of the stock market 19

Period 2006: Breakthroughdevelopment of the Vietnam stock market 20

Period 2008: In the general trend of the economy, Vietnam stock market closed in 2008 with a sharp decline 21

In 2017 stock market: One year "overwhelmed" record 23

The role of the stock market 24

The impact of inflation on the stock market 26

CHAPTER 3: Overview of the macroeconomic situation and Vietnam stock market in the period of 2000 - 2018 29

The period from 2000 to 2005 29

The period from 2006-2009 is the accelerating period of the Vietnam stock market 30

The period 2009 - 2010: The recovery period after the crisis but still implies many risks 32 The period 2011 - 2012: the period of tightening monetary and fiscal policy made the stock market difficult 33

The period 2012 - 2014: Stable growth period with many positive signals 34

The period 2014 - 2016: growth slowdown and many negative developments on the stock

market 35

In 2017: a record year 36

CHAPTER 4: Research Methods 38

CHAPTER 5: Conclusion 43

References 44

Lists of Table and Figures

Figure IJN Index2006 20

Figure 2:VN Index 2008 21

Figure 3 22

Figure4 24

Figure 5: CPI from 2011-2016 25

Figure 6: Inflation over the same period last year of the months of the year 26

from1∕2008 to 2/2017 26

Figure 7: Market capitalization ratio of Vietnam stock market in 2006 - 2009 30

Figure 8: Situation of listed companies from 2006 to 2009 30

Table 1:_Scale of the stock market from 2000 to 2005 (Source: State Securities Commission of Vietnam) 29

Table 2: Number of securities companies & number of trading accounts registered from 2006 to 2009 31

Table 3: Indicators from 2000 to 2018 38

CHAPTER 1: Introduction

Vietnam stock market has been operating for more than 15 years, although not too long, but ithas developed rapidly become an indispensable factor in making the national economy strongand play more developed It appears as a channel for raising capital for businesses and helps

to assess the situation of the business is good or bad It attracts domestic and foreign

investors However, in the last few years, the stock market has been affected by the economicand political turmoil In addition, inflation is an important indicator of economic

performance The impact of inflation is not just in an area where many sectors and marketsare no exception When it comes to stocks, we will talk about stock prices, investments,benefits and risks in securities investments The political, economic and business conditions

of all this will affect stock prices, which will create a lot of volatility So I chose to focus onthe impact of inflation on the stock market to better understand the causes and consequencesand to come up with solutions to control and improve

The thesis consists of 5 chapters:

Chapter 1: Introduction

Chapter 2: Previous studies on the impact of inflation on the market stock market

Chapter 3: Research Methods Impact of macro factors Vietnam's Stock Market

Chapter 4: Research Methods

Chapter 5: Conclusions and Recommendations

The research objective of the project is to clarify the impact of inflation on the market

Vietnam Securities Market

One of the issues that many people are concerned about is inflation, interest the exchangerate, gold price impact on the VN-Index In some countries the world as well as in the region,this issue has been many studies, in Vietnam there are also some studies related to the

variation stock price index This issue has been raised and analyzed quite a lot so that

solutions can be found to improve the situation

inflation In this study I focus only on the CPI, GDP, interest rates and indexes for analysis.With this little contribution, I hope it can provide more useful information that will benefitthe investors who want to grow in this market

CHAPTER 2: Studies on the macro factors affecting the stock market in

Vietnam

Introduced by Fama (1970) with a solid foundation, "Efficient Market Hypothesis" or

"Efficient Market Hypothesis" (EMH) set the basis for extremely important theories, policymakers as well as for stock investors Accordingly, policymakers are free to implement

national macro-economic policies without fear that these policies will alter the nature of thestock market because they affect only the price index Securities

EMH believes that competition among investors - who always want to maximize their profits

- ensures that all information is fully reflected in the stock price so investors cannot make aprofit Get abnormal returns through predictions of future stock market trends

However, studies by Gan, Lee and Zhang (2006), Mukhejee and Naka (1995), Rahman, Sidekand Tafri (2009), Narayan, K.P and Narayan, S (2010) rejected the conclusion of EMH.These studies confirm that macroeconomic factors clearly affect earnings and stock pricevolatility (Abdalla, I.S.A and Murinde, 1977)

The results of Fama and Schwert (1977), Chen, Roll, Ross (1986), Nelson (1976), DeFina(1991) and Jaffe-Mandelker (1976) emphasize the inverse relationship between inflation andstock price Basically, the stock market will operate under two conditions: high economicgrowth and low inflation But if the economy develops and inflation is high then it is notgood When inflationary pressures soar, investment analysts will be skeptical of economicprosperity or job growth reports The reason for this is that they fear that there is a boom ininflation, a fake development that has been created by the government's creditworthiness,because the government accepts a budget deficit higher and expand the money supply Thereal relationship of inflation and stock prices is always a difficult experimental question andthe relationship will change over time Experiences from the stock markets in developedcountries show that inflation and stock prices are inversely correlated, because the trend ofinflation determines the nature of growth High inflation is always a sign that the economy ishot; signaling the growth of unsustainable, while the stock market as the thermometer

measuring the health of the economy When inflation is high, the money goes down, people

do not want to keep cash or deposit money in banks but transfer to gold, real estate, strongforeign currency makes a significant amount of idle capital of the commune Assembly is inthe form of dead property Lack of capital, not accumulated to expand production, the growth

of enterprises in particular and the economy in general will slow High inflation has a directimpact on businesses: Although business activities are still profitable, high dividends but highdividend rates are attractive when inflation is high This makes securities investment is nolonger a lucrative channel (Joseph Tarza Sokpo1, Paul Terhemba Iorember, 2017).

Laopodis (2005) considers dynamic interactions among stock markets, economic activity,inflation and monetary policy The researcher looks at the first issue related to the role ofmonetary policy By using co-ordinate test, causality, error method for two-variable functionand multivariate VAR model or VEC model As a result of the two variables, they find thatthere is a weak correlation between stock returns and inflation, which means that the stockmarket can counter inflation On the other hand, the two results confirms a negative

correlation and a one-way relationship between stock returns and The Fed's reserves in the1990s were very weak in the 1970s.With the multivariate model; they have found strongsupport of short-term correlations in the 1970s with a one-way relationship in the 1990s Thisshows that the return on equity is not positive for the policy monetary easing, which tookplace during the 1990s, or a negative correlation tightening monetary policy There is a

consistent dynamic relationship between the two currency books and stock prices This

conclusion seems to contradict Fama (1981) It is assumed that inflation and economic

activity are negatively correlated but active economic and yield ratios are positively

correlated.(Nikiforos T Laopodis, 2006)

Aliyu Shehu Usman Rano (2010): Research using the model GARCH assesses the impact ofinflation on margins and the stability of the Nigerian and Ghanaian stock markets based onmonthly time series data for 1998-2010 In addition, the impact of asymmetric shocks wasinvestigated using the second-generation GARCH model developed by Sentana (1995), inboth countries The results show that in the Nigerian market bad news has a greater impact onthe stability of the stock market than good news and vice versa for the Ghana market Second,the inflation rate and its 3-month averages have a significant impact on stock market

volatility in both countries The measures taken to curb inflation in the two countries will,therefore, undoubtedly reduce the volatility of the stock market, improve the stock marketreturn and increase investor confidence

Seyed Mehdi Hosseini, Zamri Ahmad, Yew Wah Lai (2011): This article investigates therelationship between the stock market index and the four Macroeconomic variables, namelycrude oil price (COP), money supply (M2), public production industry (IR) and inflation rates

(IR) in China and India Study time from January 1999 to January 2009 by means of

verification Augmented Dickey-Fuller, ADM Johansen-Juselius Co-integrations test (1990),misaligned variant model number (VECM) The results show that in both long and shortterm, there is a link between the four selected macroeconomic variables and the China andIndia stock market indices In the long run, the impact of rising crude oil prices in the

Chinese market is positive but in the Indian market this effect is negative On the moneysupply, the impact on the Indian stock market is negative, but for China, there is a positiveeffect The impact of industrial production is negative and only in China In addition, theimpact of rising inflation on stock indices is positive in both countries In short, the impact ofcrude oil prices is positive in India This effect is negative and significant in China Theimpact of money supply on the Chinese stock market index is positive but for India, it isnegative However, all these effects are negligible On the other hand, the impact of inflation

on the current Chinese stock index (SSE) is positive and significant but this effect lasts amonth even though the positive effect is negligible Meanwhile, in India the impact is

negative but not significant However, the lag efficiency sound and significant (Seyed MehdiHosseini, Zamri Ahmad, Yew Wah Lai , 2011) Thus, by referring to empirical studies on theinfluence of inflation to the stock market, all research papers agree the content of the impact

of inflation on the stock market in the short term and in the long term However, differentstudies have different conclusions about different levels of influence, and there are

appropriate measures to improve the situation

Caroline Geetha, Rosle Mohidin, Vivin Vincent Chandran and Victoria Chong (2011): Studythe relationship between inflation and stock market in Malaysia, US and China, time seriesdata from January 2000 to November 2009, includes interest rate variables (Tbill interest inthe market Malaysia and US interest rates, China central bank interest rates, inflation (CPI),exchange rates, GDP (industrial production) and stock prices Data derived from the

International Financial Statistics (IFS) database, with the exception of China's CPI, are

obtained from the National Bureau of Statistics of China All data is converted to logarithm.The paper uses the Augmented Dickey Fuller Test (ADF) - to determine the stopping of timeseries data Co integrations test to look at the long-term relationship between variables

Vector error correction model (VECM) to explain the influence of independent variables ondependent variables in the short run The result is that in all three countries there is latency.The Johansen assertion confirms that there is at least one co-significant equation of 5 percentfor Malaysia and the United States On the other hand, China has three equations that

integrate at a level of 5 percent, a Co-significant equation of 5 percent This means that thereare long-term relationships between variables in the three countries The results of the VECMshow that there is no short-term relationship between the stock market, expected inflation,exchange rates, unexpected inflation, interest rates and GDP for Malaysia and the US.

However, the results of China's VECM show a short-term relationship between the expectedinflation rate and China's stock market Research shows that there is a long-term relationshipbetween stock markets and variables in Malaysia, the US and China As a warning, investorsinvesting in three major stock markets may be at risk of benefiting from diversification oftheir portfolio because of the link between macroeconomic variables and share prices on thestock market Thus, the return on the stock market may be affected by inflation as

inflationary pressures may threaten the company's future profits and nominal discount ratesrise under inflationary pressures play, reduce the present value of future profits and thusaffect the stock market Therefore, Malaysia, the United States and China need to review andimprove their monetary policies that are consistent with low inflation and inflation

expectations On the other hand, some evidence suggests that: One is having a significantshort-term relationship between the stock market and

China's expected inflation rate Second, there is a significant relationship between the

exchange rate and the Chinese stock market As such, investors may not achieve any

diversified portfolio interests in the short term This study highlights the importance of

macroeconomic variables affecting the stock market, as well as inflation that again becomes

an important issue and focus of the Government in macroeconomic management As a result,

it is suggested that Malaysia, the US and China should use the information on expected

inflation, unexpected inflation, exchange rates, interest rates and GDP forecasting the

movement of the stock market.(Caroline Geetha, Rosle Mohidin, Vivin Vincent Chandran ,2011)

Garefalakis, Dimitras, Koemtzopoulos, Spinthiropoulos (2011): study the determinants of theHong Kong stock market (HSI) such as oil prices, S & P 500 index, gold prices and USD /JPY exchange rates Data from January 2002 to August 31, 2009 The paper uses the

GJRGARCH model As a result, the positive impact of the US stock market return, oil prices

on the Hong Kong stock market, the negative impact of gold price fluctuations, the USD /JPY exchange rate to the HSI

Nguyen Thi Bao Khuyen (2007): To examine the effectiveness of the stock market in

Vietnam, analyzing the relationship between VN-Index price indexes, industrial output,

Inflation, exchange rates, lending rates, and money supply changes through the Granger 2causal model and error correction, data for variables in the model were collected by month,from July 2000 to March 2007 The percentage of money supply did not affect stock prices,the positive industrial output To the stock price index, the inflation rate (CPI price index) has

a negative impact on the stock price index at a very high level, the exchange rate and lendinginterest rates negatively impact the price index stock There is a two-way causal relationshipbetween the stock price index and the macroeconomic variables, having a one-way causalrelationship from the macroeconomic variable to the stock price index ie the information onthe economy In general; it is not immediately reflected in the stock price index

Phan Thị Bích Nguyệt và Phạm Dương Phương Thảo (2013) : Analyzing the impact of macrofactors on the stock market in Vietnam, the paper examines the correlation between the stockmarket and six factors macroeconomic factors (money supply, inflation, real economic

activity, interest rates, exchange rates, prices oil) Data for variables in the model were

collected by month, from July 2000 to September 2011 (135 observations) Research appliedthe test co-integrated testing method of residual unit testing Engle Granger,Unit testing andmultiple regression estimation equation to reflect termites correlate Results of money supply,industrial output, inflation, oil price Positive correlation with the stock market Variableinterest rates, exchange rates Negative correlation with stock market (Phan Thị Bích Nguyệt

và Phạm Dương Phương Thảo , 2013)

Thus, by referring to empirical studies on the influence of inflation to the stock market, allresearch papers agree The content of the impact of inflation on the stock market in the shortterm and in the long term However in each study have different conclusions about the impact

of different

On July 11, 1998, the Government signed the Decree No 48 / CP on securities and stockmarket officially launched for the Vietnam stock market On the same day, the Governmentalso signed the decision to set up the Securities Trading Center in Ho Chi Minh City andHanoi Preparations for the Vietnam stock market were actually issued by the State SecuritiesCommission of Vietnam (Decree No 75 / CP) on November 28, 1996

• Ho Chi Minh City Securities Trading Center (HSTC) was established under Decision No.127/1998 / QD-TTg dated July 11, 1998 and officially put into operation the first tradingsession on July 28,2000 with two stocks: REE and SAM As of August 8, 2007, Ho Chi MinhCity Securities Trading Center was changed to Ho Chi Minh City Stock Exchange By theend of March 2013, 307 stocks, 5 fund certificates and 39 bonds were listed on Ho Chi MinhStock Exchange Total volume of listed shares is 23,157,211.12 shares with a value of VND236,487,125.54 million

• Hanoi stock exchange was officially born on March 8, 2005 Unlike Ho Chi Minh CitySecurities Trading Center (which is the place for listing and trading securities of large

companies), Hanoi stock exchange will be a "playground" for small and medium enterprises(with a charter capital of 5 to 30 billion copper) The number of shares is about 400 shares

3 The macro Index

❖ Gross National Product - GDP

One of the most important indicators of the macro economy is GDP - Gross NationalProduct If GDP growth is positive, it will positively affect the stock market in both

quantity and quality As the GDP grows, the number of firms will increase, creating morejob opportunities and business opportunities for the economy As the economy developswell, foreign investors will see this as a potential market and thus we will attract directFDI and FII indirect investment As more foreign investors improve the efficiency of themarket and help the market become more transparent, the market becomes more activeand dynamic Economic growth creates more demand for financial services, from whichfinancial services will grow to meet the capital needs of businesses However, when theGDP is overheating, the stock market will be push to the highest level and the risk ofeconomic crisis and stock market crisis is possible

❖ Consumer price index - CPI

This is a percentage measure to reflect the relative change in consumer prices over time.This index only changes relative because it is just a representation of the entire consumergoods

The formula for calculating the consumer price index:

, ʌ _, v c° s ∣ of market basket t

Consumer Price Index (CPI) t= — -— -— * 100

Cost of market basket t

0

Normally, if the consumer price index stabilizes at 5%, it is the ideal figure for the stockmarket to perform well If CPI increases then we will have to increase input costs, so theprofit of the business will decrease so the business will no longer attract investors In

addition, the state will have to tighten credit policies, investors will have more difficultyaccessing capital and reducing investment in the stock market The increase in CPI led to theincrease in bank interest rates, at which time depositing savings or buying gold would

become more attractive than investing in securities Increasing CPI could also have two

opposite effects: increasing the sale of bad stocks to withdraw funds and buying good stocks

to hedge inflation This is also the cause of inflation

P0 is the average price of the current period

P-1 is the price of the previous period

Inflation is an increase in the soaring prices of most commodities at a time that affects theeconomy Sargent (1999) develops a theory that includes some elements from DeLong (1997)and Taylor (1997), and builds on the well-known Kydland-Prescott (1977) model of inflation

In the Kydland-Prescott model, discretionary policymakers are tempted to create surpriseinflation in order to temporarily push unemployment below the natural rate Private sectoragents recognize this temptation and adjust their inflation expectations upward accordingly

In equilibrium, no surprises occur but the economy ends up with higher than optimal

inflation (Kevin J Lansing, 2000) When inflation occurs in any country, the currency loses

its value For example, we can clearly see that the cost of producing a cake in the past was50,000 VND but now the cost can be doubled because of the price of ingredients but sugar,flour, butter milk increased, forcing producers to raise product prices up So the currency haslost value Inflation is simply a rise in the average price of goods and services in the macroeconomy Which particular goods and services depends on the measure we are examining.Consumer price inflation is the one usually in the news, and it takes a weighted average ofvarious items purchased by the typical household (the list being determined by survey andthen updated periodically) The average can rise while some prices have actually fallen, andhow much it reflects your personal situation is a function of how closely the basket of goodsand services in the index matches your buying patterns But, the bottom line is that we saythat inflation has occurred when the average price of those goods and services has increased.(John T Harvey, 2011) One of the causes of inflation is that the government prints out toomuch money and when the supply becomes too abundant, the currency becomes worthless.This leads to excessive expectations and the people themselves create changes to the

economy The political and economic turmoil in the world is also a factor causing inflation.For small countries like Vietnam, any political and economic impact of world powers canhave an impact on the Vietnamese market Currently, some government-funded services such

as electricity bills, tuition fees and medical services fees are increasing with usage, but peoplewill have to spend more money This further demonstrates the depreciation of the currency.Vietnam is a country that pulls out many organizations and signs many agreements, so if acountry pulls out strongly it will be affected

For example, the US withdrawal from TPP, the export market of Vietnam will be

significantly affected

In recent years, inflation has had a strong impact on the economy where the stock market isalso experiencing certain difficulties A few decades ago, inflation was not strange even indeveloped countries, which is several times higher than today This thing shows that inflationhas been controlled better, experts have spent a lot of time and effort to learn and analyze andthen provide solutions to better control inflation

In some cases inflation has become so extremely high that economists have a special namefor it: hyperinflation Germany after the First World War is a classic example, but the mostrecent extreme case is Zimbabwe where — at the peak in mid-2008 — prices doubled everyday (Daniel Richards, Manzur Rashid, Peter Antonioni, 2018) On the other hand, supply is

also one of the causes of inflation The demand for human housing is increasing, and

construction material suppliers are convinced that materials such as wood will become

favored and that companies and factories will leave the building Their prices are high,

consumers will also have to spend more money to buy a product like Sellers will be moreprofitable Many people find it beneficial to invest and sell the same products and this canlead to inflation because the power of the market is huge and sometimes we can not anticipatethings what will happen High inflation is always a sign that the economy is heating up,

signaling unsustainable growth, while the stock market as a thermometer measuring the

health of the economy When inflation is high, money goes down, people do not want to keepcash or deposit money in the bank because the nominal interest rate of deposits is lower thanthe inflation rate They moved to hold gold, real estate; strong foreign currency High

inflation also has a direct impact on the stock market: Although businesses are still profitableand paying high dividends, dividends cannot be higher than the inflation rate This makessecurities investment is no longer a lucrative channel Legendary investor Stephen Leeb, inthe definition of stock trading time, the inflation rate, the growth rate of the US stock market

in the period from 1929 to 1981, and the relationship between inflation and inflation arealways the enemies of the stock market! (vietbao, 2007)

❖ Price of gold

Gold is different from other assets because the potential for gold is high liquidity and it reacts

to price changes (Colin Lawrence, 2003) The fluctuation of gold price affects most of theworld's economies including the stock market Investors have a habit of using risk

management strategies simply to diversify their portfolios of commodities with either gold oroil investments as these investments often have an inverse relationship reversing the trend ofthe stock market

Garefalakis, Dimitras, Koemtzopoulos and Spinthiropoilos (2011) show that the volatility ofgold prices negatively affects returns on investment in the Hong Kong stock market

Gold and fluctuations of the market have a causal effect on the price of gold increased, thechaos of the economy increased

When gold prices fluctuate, this means that the market is panicking and thus reducing theconfidence of investors Investors often invest directly and indirectly in gold for risk

prevention

In summary, it can be seen that the price of gold in politeness is considered a safeguard

against the damage that occurs during periods of inflation, social instability - periods whenstock prices have fallen

In times of crisis, share prices often fall sharply while gold prices are rising, although thelevel may vary for each economy

4 The stages of development of the stock market in Vietnam

The period 2000-2005: The toddler stage of the stock market

From 2000 to 2005, the market was in a doldrums, eliminating the fever in 2001 In the firstfive years, it seems that the market does not really attract the attention of the masses, and theups and downs of the market do not have the effect of expanding the social impact that canaffect the market, the economy as well as the life of every citizen According to statistics ofthe State Securities Commission, by the end of 2005, the total value of Vietnam's securitiesmarket reached nearly 40 trillion dong, accounting for 0.69 percent of gross domestic product(GDP) Vietnam stock market has 4,500 billion dong of shares, 300 billion dong of

investment fund certificates and nearly 35,000 billion dong of government bonds and localgovernment bonds, attracting 28,300 trading accounts , the growth rate of the stock marketdoubled compared to 2004, mobilized 44,600 billion, now the stock value against the

country's GDP reached nearly 1% (saigon online, 2005)

Period 2006: Breakthrough development of the Vietnam stock market.

In 2006 was the "breakthrough" development of the stock market in Vietnam With a growthrate of 60% from the beginning to the middle of 2006, the market capitalization volume hasincreased 15 times in a year, and the Vietnamese stock market is increasingly attracting

domestic and foreign investors

^VNINDEX 2006

Figure 1

In this year, the VN-Index in the trading floor of TP Ho Chi Minh City (HoSE) reached arecord level of 809.86 points Compared to the beginning of the year, VN-Index has grown to146% As of December 29, 2006, Ho Chi Minh City Securities Trading Center had the

participation of 106 shares, 2 fund certificates and 367 bonds with total face value of morethan 72 trillion dong At the Hanoi trading center, the HNX-Index rose from 95 points at theend of 2005 to 258 points, up 2.7 times in 2006 The number of companies trading on Hanoisecurities trading floor increased from 6 stocks to 87 share and 91 bonds at the end of theyear with a total registered face value of 29 trillion dong The main cause of the boom of theVietnam stock market in 2006 came from important political and economic events The cause

of the deep and long-lasting impact is the fact that Vietnam has officially joined the WorldTrade Organization (WTO) as well as successfully organized the APEC Summit Both ofthese events have been and continue to make a good impression on foreign investors and that

is a signal for both direct and indirect waves of investment promising to flow into Vietnam

In terms of capitalization, the entire Vietnam stock market with 193 stocks at the end of theyear reached VND220 trillion, equivalent to USD13.8 billion (phuong mai, 2008)

Period 2008: In the general trend of the economy, Vietnam stock market closed in 2008 with a sharp decline.

Figure 2

Market highlights: Index declined, market prices of shares declined sharply (many stocks fellbelow par value), the liquidity was weak, the divestment of foreign investors, the intervention

of the executives and the dismal psychology of investors (Tam Thien, 2009)

In 2009, despite the economic difficulties, but one year marked the strong development of thestock market in Vietnam Both VN-Index and HNX-Index recovered strongly above 50%.The number of newly listed companies soared, many of which were listed on the floor HanoiSecurities Trading Center converted into a stock exchange

From 2010 - 2012: The period of continued fluctuations in the stock market in Vietnam.Most of the stocks fell in price, the market fluctuated slightly This is mainly due to the

caution of investors From the middle of September onwards, the Vietnam stock market hashad negative impacts from both domestic factors, such as problems arising after the lowering

of interest rates, especially the exchange rate and the world factor , as evidenced by the poorperformance in tackling the sovereign debt problem in Europe, which led to the weakeningprospects of the global economy At the end of December 30th 2011, VN Index and HNXIndex closed at 351.55 and 58.74 points respectively As compared to the beginning of 2011,

Ho Chi Minh trading floor dropped sharply 27.46% while Hanoi floor slumped to over 48%

In the early months of 2012, the stock market showed signs of improvement Soon after, thebad debt situation of banks increased, making it difficult for enterprises to access capital,which led to difficulties in investing.

Figure 3

In 2015: This is the year when stock prices have risen sharply, which is a good year for

stocks This phase formally signed the FTA between Vietnam and the Eurasian EconomicUnion

(cafef, 2015) Figure 4