Public investment to be the foundation for the development of the stock market


Large public investment projects are opportunities for the growth of many industries. Photo: Source: internet
Large public investment projects are opportunities for the growth of many industries. Photo: Source: internet

Positive impact on stock market

According to experts, in the context that some key drivers of the economy seem to be slowing down, the stock market will benefit from the efforts of ministries and sectors in the disbursement of public investment in 2023. If the acceleration of public investment helps the economy maintain a good growth momentum this year, it will also have a positive impact on the stock market.

Sharing at the Financial Street program, Mr. Nguyen Hoang Linh, Research Director, Vietcombank Fund Management Company (VCBF), said that the stock market has grown in the past two months with expectations for effective public investment.

However, Mr. Nguyen Hoang Linh also emphasized that it is a medium and long-term vision. In the short term, specifically this year, the stock market still faces many challenges, especially in the context that monetary policy is still tight and the profits of many listed companies are likely to decline at least in the first half of this year.

“However, if we look at the positive side, central banks around the world are likely to end their rate hike cycle in the first half of this year and may start cutting rates later in the year, especially the FED. This will create positive sentiment and help the State Bank be more flexible in operating monetary policy to support the economy. Furthermore, if the problems of the corporate bond market are resolved well, we can expect a strong return of cash flow into the stock market, especially from individual investors,” said Mr. Nguyen Hoang Linh.

According to experts, the stock market often reflects investors’ expectations for economic growth six months to a year away. This may partly explain the fact that our stock market has unexpected performance in the second half of 2022 when, besides factors such as liquidity and interest rates, investors are also concerned about external challenges for the economy in 2023.

“I think in the first half of 2023, the market may not record a solid increase. Cheap assets at this time still have no stable growth when interest rates are still high, as well as the real estate market or problems related to the corporate bond market that have not yet been resolved. I expect the picture of the market to be brighter when entering the second half of 2023 when we will receive better information from the world market as well as the country’s market and public investment disbursement,” said Ms. Tran Thi Khanh Hien, Head of Analysis Division of VNDIRECT Securities Company.

Many industries benefit

With a large amount of public investment (more than VND700 trillion) in the plan for 2023, experts say that many industries will benefit when public investment is accelerated.

Affirming that public investment is a very bright topic in 2023, Ms. Tran Thi Khanh Hien said that the industries that will benefit include contractors, infrastructure construction companies, and construction materials companies such as asphalt or companies related to construction stone.

However, the level of benefit will depend on the projects as well as the time of implementation. “For example, in 2023, public investment will focus on major projects such as the second phase of the North-South expressway project, the Long Thanh airport project, Ring Road No. 3 project in HCMC and Ring Road No. 4 project in Hanoi. These are the four key projects that will be deployed this year, the contractors who are appointed to participate in these projects will be the first beneficiaries. In addition, enterprises with top capacity, large scale, and past achievements are also the ones that will benefit the most, because these will be the first enterprises selected to participate in these projects,” a representative of VNDIRECT said.

According to experts, public investment is not only limited to transport infrastructure but also involves many other areas such as energy infrastructure, which is also very large and will attract both public and private investment in the near future.

Sharing the same view, Mr. Nguyen Hoang Linh said that in the short run, the group of direct beneficiaries will include construction consulting companies, construction contractors and construction materials providers to serve the traffic infrastructure works and even electricity and water works.

Low disbursement of public investment sourced from foreign borrowing Low disbursement of public investment sourced from foreign borrowing

Notably, the Government is also accelerating the implementation of digital transformation following the world’s trend, which is also part of public investment and it will create opportunities for businesses in the information and technology sector. “It is clear that if infrastructure works are gradually put into practice, it will create a big kick for the economy, in the immediate future, it will help the trade flow become more convenient and smooth, contributing to reducing logistics costs. Thus, logistics companies definitely benefit. Besides, retail and service businesses will also benefit, as logistics costs now account for a relatively large proportion of their cost structure. In the long term, if the public investment is implemented effectively, it will bring a very positive and far-reaching spillover effect to the economy, accordingly, all industries will benefit,” said Nguyen Hoang Linh said.


Leave a Reply