Consulting with SSI experts: Is the stock market worried about inflationary pressure?

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Inflation may increase in the fourth quarter if the epidemic is controlled and the domestic economy reopens in the third quarter.

The room for fiscal and monetary policy is still wide this year.

Investors can still remain optimistic about the growth of the stock market, when inflation pressure is not too great.

At the second live Livestream with the topic “Is macroeconomics necessary for stock investment” in the Investment Advisory Program Series of SSI Securities Analysis Center – SSI Research on the Fanpage of VTV24 Money and Fanpage SSI Securities, Mr. Le Quy Hai, Deputy Investment Director of SSI Fund Management Company Limited mentioned that after the epidemic appeared, most of the stock markets of countries increased. The reason is that countries implement loose monetary policies and lower interest rates. This makes the capital cheaper and the savings channel less attractive, leading to the cash flow shifting to other investment channels, including securities.

Mr. Hai also said that the State Bank (SBV) is operating monetary policy very cautiously, controlling inflation closely, typically with the assignment of lower credit targets than last year to banks. At present, inflation pressure will not be too great and there is still room to support the economy in the second half of the year. Therefore, investors can still remain optimistic about the growth of the stock market.

Deputy Director Pham Luu Hung said that if you look at the numbers, Vietnam’s inflation in the past 6 months was 1.47%, the lowest in the last 5 years, in contrast to some countries in the world, for example the US. The reason for the difference comes from the “basket” of goods of Vietnam – a developing country and the US – a developed country. In the “basket” of Vietnamese goods, the proportion of food, food and beverage accounts for about 36%, higher than that of the US.

“The proportion of pork products in Vietnam’s basket of goods is 10 times that of the US, so when the price of pork increases, it fluctuates more,” said Mr. Hung.

Deputy Director of SSI Research, Mr. Pham Luu Hung at the livestream. Photo: SSI.

In the first half of the year, according to SSI expert, Vietnam suffered two waves of Covid-19 epidemic, so the pressure to increase prices for food items was low, leading to low inflation. However, he also noted that inflation still needs attention in the second half of the year. If the epidemic is handled in the third quarter and the domestic market is opened in the fourth quarter, the prices of food and food commodities will increase again and inflation will increase. On the other hand, sensitive commodities such as gasoline are likely to increase in price when the balance of the stabilization fund is at a low level.

However, this year, Mr. Hung believes that inflation will be lower than the Government’s target of 4%. Therefore, he affirmed that the monetary policy space is still relatively wide. The SBV can still support the economy without worrying about high inflation like other countries in the world.

Mr. Hung also mentioned that the fiscal policy space in 2021 is also better than in 2020. Budget spending in 2020 is prudent because of the risk of uncertain revenue and expenditure sources. In the first half of 2021, budget revenue achieved good results, reaching 58% of the year plan. The budget is in surplus. The impact of the Covid-19 epidemic this year is larger, so fiscal policy is likely to have a stronger scale.

“This year’s social security package of VND 26,000 billion is smaller than the VND 62,000 billion package last year. However, the actual disbursement of the VND 62,000 billion package is low. The VND 26,000 billion package is forecasted to be disbursed better, localities have can disburse more”, Mr. Hung gives an example.

Deputy Director of SSI Research also mentioned that public investment disbursed in the first half of the year was quite low, only about 29% of the plan. The Government has a resolution requesting the disbursement of 60% of the plan by the end of the third quarter. Thus, disbursement in the third quarter may increase by 25% compared to the same period in 2020.

Source: – Translated by