Forecasts made by domestic and foreign organizations estimated the GDP growth at 4.8 percent to around 5.4 percent, but the official figure remained at only 3.32 percent.
Poor business results
The first quarter macro indicators imply that socio-economic activities in general were at a very low level. Indeed, GDP growth of 3.32 percent was the slowest since the first quarter of 2020 when the Covid-19 pandemic had just begun to spread. The Index of Industrial Production (IIP) in the first quarter decreased by 2.2 percent over the same period last year. The main reason was the high cost of production input and the number of export orders dropping sharply. The processing and manufacturing industry also decreased by 0.37 percent.
Although there have been no estimates or reports of business results for the first quarter of 2023 of listed companies so far but with the overall economic growth slowing down, production and business activities will inevitably be affected. However, some shares of enterprises indicated this drop in the last general shareholders meeting and in the monthly profit reports. For instance, MWG Mobile World Joint Stock Company recorded a 25 percent decrease in net revenue over the same period when the Dien May Xanh and Mobile World chains decreased by 32 percent.
The distributor PetroVietnam General Services JSC Corporation (PET), also reported a decrease of 3.6 percent in the first two months of the year, while the distribution segment accounting for nearly 88 percent decreased by more than 5 percent. Although technology giant FPT reported a 19 percent increase in pre-tax profit in the first two months of the year, the domestic information technology segment recorded a loss due to a lack of contracts from the real estate industry and banking industry. Online advertising revenue declined in the current domestic economic downturn, incurring a loss of VND 2 bln, down by 26.7 percent year-on-year in the first two months of 2023.
Another synthesis shows caution from businesses themselves. The 2023 shareholders meetings will soon take place and many businesses have set very cautious profit targets for this year. According to FiinTrade statistics, until 27 March 2023, when 194 non-financial enterprises announced their business plans in 2023, only 79 enterprises expected profit growth. The main reasons presented by enterprises to shareholders are environmental risks, high-interest rates, and weak domestic and export demand.
Market shaky
Profits of companies in the first quarter of 2023 will be announced by the end of April, which means that the market has nearly a month left. There will still be businesses announcing good profits or even strong growth, but with the current gloom, the signs may only show the worst is still ahead. The problem is that the stock market needs to know how bad it truly is and whether it will worsen even further or not.
There are three factors that are most concerning to the stock market in 2023, namely, interest rates, bonds maturity, and negative business results. Although the bonds maturity pressure is temporary, the other two factors will need more time to visibly show a decrease.
As far as the interest rate factor is concerned, there is a relatively high chance that domestic interest rates have peaked. The latest interest rate hike by the US Federal Reserve (FED) in March had almost no impact and the domestic interest rate level continued to be down and is now at a quite reasonable rate. If by May the FED does not raise interest rates any further, it is almost certain that domestic interest rates will continue to adjust as inflation is now stable, the exchange rate is falling, and there is more growth. Credit growth in the first quarter of 2023 is estimated at only 1.61 percent, while in the same period of 2022 it was 4.03 percent, which means that credit will accelerate in coming months.
Concerning the second factor, business results of the first quarter were directly affected by high interest rates, which is partly the reason why credit growth was very slow. The factor that is not clear from the first quarter onwards is the possibility of a recession in key markets for Vietnamese exports. Export turnover in the first quarter was still in surplus but export value decreased by 11.9 percent, and imports decreased by 14.7 percent. Enterprises that depend on export activities are likely to remain affected.
However, for listed companies it is important to know whether the lowest profit point has passed in the first quarter of 2023 or not. The market may correct downwards to discount this profit drop, but then it will see a chance to improve in the coming next quarters of the year.
The stock market moves by looking at future predictable changes and does not see statistics. The market will consider a good number, however good it may be, as a risk, with the next change being even worse. Conversely, a bad number may be seen as an opportunity, with the only direction of change being seen for the better. If the falling point of everything was concentrated in the first quarter of 2023, from macro to micro, it still is a bright prospect for the stock market.
