How does the Russia-Ukraine war affect the Vietnamese stock market?

On February 24, 2022, Russia launched an attack on Ukraine. This event immediately caused a drop in the Vietnamese stock market. However, in the long term, how the tension between the two countries will affect the Vietnamese stock market is still a question that many investors are wondering.

The war between Russia and Ukraine presents both risks and opportunities for investors. Photo: Shutterstock

According to political experts, the recent tension between Russia and Ukraine is a localized geopolitical event. In that situation, the US and NATO countries have confirmed that they will not participate in the war, so the possibility of a large-scale war is quite low. The war will have impacts on many codes of the Vietnamese stock market, bringing both risks and opportunities to investors.

In this event, we need to pay attention to two asset classes: protective assets and investment assets. In the short term, protective assets tend to increase in price, especially gold. Meanwhile, high-risk investment products such as cryptocurrencies have fallen sharply (from $42,000 to $38,000 in a few trading sessions).

If the tension between Russia and Ukraine continues for a long time, many countries in the world will impose trade sanctions on Russia. Opportunities will come to countries that are behind Russia in terms of exports in specific industries, such as: fertilizers, finished steel products, steel billets, galvanized steel. Thus, in a stable and political environment, Vietnam is fully capable of benefiting from exporting products in the above industries.

As for risks, Vietnam is likely to face the problem of market conversion for the products that we mainly export to Russia such as seafood, vegetables, raw coffee and rubber.

During this period, investors need to be alert to make the right decisions. Photo & graphics: Bui Xuan Luan

Russia is the world's main source of oil and gas, so when this country is sanctioned, oil prices are likely to increase in the short term. This is a strategic commodity and is of special importance to many economies, so sooner or later the inflation rate in Vietnam will increase significantly.

The developments in the Vietnamese stock market in the past few sessions have once again demonstrated the important role of behavioral finance in the volume of buying and selling in the market. It is behavioral finance that has had a strong impact on market transactions in recent events, not the core indicators of financial assets.

It can be cited as follows: Because 64% of Russia's export turnover in 2021 is fuel products, the increase in crude oil prices will benefit Vietnamese oil exporting enterprises, while enterprises producing and trading petrochemical products will suffer losses. But in the Vietnamese stock market, when an event occurs, it will mostly increase or decrease the price of all stock codes. The same story also happened when the Government officially announced a post-Covid economic recovery policy package, leaning towards fiscal policy. The official announcement had the impact of increasing the stock codes of industrial park real estate at that time. It is agreed that this industry will also benefit from the policy, but whether all codes will benefit or not is another story because factors such as the scale of non-state investment capital, whether that province/city is classified as a new growth pole of the Vietnamese economy or not... will also strongly affect the stocks of this industry.

To some extent, it can be said that swing traders are making up a large proportion of the Vietnamese stock market. Therefore, at this time, investors need to be alert enough to not only swing trade but also cut losses when necessary with weak stocks and switch to holding status with strong stocks.

Dr. Nguyen Hoang Nam - Head of Banking and Finance Department, Dai Nam University