Russian-Ukrainian Conflict Will Impact Vietnamese Stock Market | stock Exchange
Mr. Khanh spoke with Saigon Investment on how the Vietnamese stock market might be affected by this current crisis in Ukraine, and how it will compare to the global stock market and other financial institutions. Khanh said the US stock market fell sharply, but the domestic stock market in Vietnam only fell on Feb. 24 but then rebounded the next day, despite the ongoing war. However, the fall was not too strong and certain industries such as energy and trade seem to have benefited from it.
Khanh believes that due to the current Russian-Ukrainian crisis, the stock market in Vietnam has certainly been affected, but only in the short term and the magnitude of the fall has not been too great. However, over time, it will be more affected in the medium and long term. Even though the war may end soon, the consequences will be long-lasting on the general economy. Central banks around the world are now racing to raise interest rates and tighten monetary policies. Assets previously classified as safe investments, such as gold, are expected to attract investors for the sole purpose of protecting and reducing risk.
JOURNALIST: – Sir, can you explain very clearly the impact of the ongoing Russian-Ukrainian conflict on the economy in general and on the stock market in particular?
MR. PHAN DUNG KHANH: – The war may only be short-lived, but the long-term impact is what we need to pay attention to. Many people believe that because of this war, the US Federal Reserve (Fed) and other central banks will consider changing their monetary policy by not raising interest rates, or even loosening economic support, invigorating the financial markets as well.
However, central banks will be stuck in a dilemma because the Covid-19 pandemic is still complicated, the price of raw materials is rising, the price of oil has reached $100 a barrel, and in this current conflict between Russia and the Ukraine, the price may continue to go even higher, which will put more pressure on inflation. Moreover, Russia and Ukraine play a huge role in supplying important essential products to the world, especially in the field of technology, which is an important basis for advancing towards the 4.0 era.
According to statistics, Russia currently accounts for 45% of the world’s palladium supply and 35% of the palladium in the United States is imported from Russia. Palladium is mainly used in the manufacture of sensors and memory cards. Ukraine supplies the United States with more than 90% of semiconductor neon gas, a key ingredient in lasers used in chip manufacturing. Since December 2021, tensions between the two countries have driven the price of palladium up by 52%.
In 2014, when Russia annexed Crimea, the cost of producing neon lights increased by 600% overnight. Russia also has a very large amount of nickel mining, and if supply is interrupted or prices rise, electric vehicle batteries and other related equipment will become scarce and much more expensive. The electric vehicle industry alone saw its strongest ever growth of 122% in 2021.
Therefore, even if the war ends soon, its economic consequences will be long-lasting. Thus, US and Western sanctions against Russia could change monetary and fiscal policies, which will have a partial impact on the market. Safe investments like gold will attract cash flow in an effort to protect and reduce risk.
– Sir, if the stock market today is affected by many unknowns, what advice would you give to investors? Should they buy gold then?
– In my opinion, short-term investors can always surf on the group of stocks that benefits such as energy, consumer goods, commodities, technology and financials. However, it is advisable to divide the portfolio and add defensive values with fundamental elements. At the same time, minimize borrowing and margin at this time. For medium and long-term investors, this is the time to restructure the portfolio in terms of values on a good basis.
The recommended method is dollar cost averaging (DCA), instead of or using financial leverage. The market will certainly be volatile, but we can educate ourselves and build a flexible investment strategy for different phases of the market. In this way, you will no longer be affected by market fluctuations and fraudulent groups that harm your financial health.
Currently, individual investors should not buy gold if they intend to hold it only for the short term. It should be noted that the price difference in hot market times has widened significantly. The selling price and the spread with the world price now stands at 12mn VND to 13mn VND per tael, so holding the short term is even more risky.
Therefore, investors who do not intend to hold for the long term and who intend to buy new should only have a certain proportion. Depending on age and risk tolerance, investors should only allocate 10-50% investment in gold. In particular, investors should not use borrowed money to buy gold, or simply keep most of it in their investment portfolio. However, investors who bought low before the recent volatile crisis may hold out for another year or two.
– Sir, what do you think about the net selling trend of foreign investors in the coming times?
– In my opinion, this trend will be difficult to change. Foreign investors have been net sellers for the past two years in the short term, so their net purchases will also be difficult to stabilize, especially in the current unstable global situation. Institutional investors are more cautious, so it’s hard to expect them to shell out heavily in the near future.
– Thanks very much.