VIETNAM NATIONAL UNIVERSITY UNIVERSITY OF ECONOMICS AND BUSINESS FACULTY OF FINANCE AND BANKING NR GGvy EXAMINING THE IMPACT OF COVID-19 ON THE CONNECTEDNESS AMONG VIETNAMESE BANK STOCK PRICES SUPERVISOR: Dr. Le Hong Thai STUDENT: Le Hien Luong STUDENT CODE: 19050688 CLASS: QH-2019-E TCNH CLC 3 Ha Noi, May 2023 wlles DECLARARTION I hereby declare that this graduation thesis is my own work, with the support of my supervisor, and has not copied the work of others. This is my own research work. The data and secondary information used in the thesis are sourced and clearly cited.
This statement is entirely my responsibility. TABLE OF CONTENTS. 6 LIST OF ABBREVIATTIONS.s-cs nàn HH HH HH HH HH HH HH1 7 IBEx09)8321000)5177. 9 LIST OF TABLES.
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The random walk theory of StoCK Prices. The theory of dividend policy and impact of dividend policy on stock prices. Theoretical basis about efficient Market. Factors affecting the Stock PriCeS.---s-©c<+cx++teErttrerrrtrttrrtritrirrkirrirrrrrrirrirririrrrrrrrrrrrrrrrree 18 "0oố 02.
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Net directional connectedT@SS. HH HH HH HH hờ 55 4. Impact of COVID-19 cases on the connectedness of bank stocks.-- cà HH HH HH HH1 1e gờt 58 5.1 Summary of research results 7 6.2 — PolicyÄìối eo 7. Policy Implications for the gOVeTIMRTE.
¿(56 ssEkkEEkkH gi gêt 59 5.3 _ Research limitations and directions for future studÌes. Directions for future SEUÏ@S. «ch nh nhiệt 61 9301310105017. 62 References in EngliSH.---s-- xxx tt tHHHHHà Hà Hà Hàn Hà Hà Hà Hà KH HH Hy pH HH HH nghành nhikt 62 References in Vi€tfaISG.
--s-s+ tt tk tktrrrrrrrrkrrrkerrkerrkee 63 ACKNOWLEDGEMENT During the process of implementing and completing the graduation thesis, I have received help and support from many sides. First of all, | would like to thank my instructor - Dr. Le Hong Thai. He is a person who is always dedicated and enthusiastic to guide and guide me during the time of researching and implementing this thesis.
In addition, through the thesis, I would like to express my deepest gratitude to the lectures who are teaching at the University of Economics and Business (UEB) - Vietnam National University who have passed on their passion and economic knowledge from basic subjects to specialized subjects. The lectures helped me to have the background of my current major in Finance - Banking, from which I could complete this research topic. Finally, I would like to thank my classmates and family who have always been by my side and supported me during the thesis work. Thank you sincerely.
LIST OF ABBREVIATIONS Abbreviations Full name ARCH AutoRegressive Conditional Heteroskedastic ARDL AutoRegressive Distributed Lag ASEAN The Association of Southeast Asian Nations AUD Australian Dollar CASA Current Account Savings Account COVID - 19 Coronavirus disease 2019 CPI Consumer Price Index DDM Dividend Discount Model EGARCH Exponential General AutoRegressive Conditional Heteroskedastic EPS Earnings Per Share FDI Foreign Direct Investment GARCH Generalized AutoRegressive Conditional Heteroskedastic GBP British Pound Sterling GDP Gross Domestic Product GFEVD Generalised Forecast Error Variance Decomposition GIRF Generalised Impulse Response Functions HOSE Ho Chi Minh Stock Exchange IMF International Monetary Fund IRF Impulse Response Function MVA Market Value Added NIM Net Interest Margin NPDC Net Pairwise Directional Connectedness NPV Net Present Value NZD New Zealand Dollar OECD Organisation for Economic Co-operation and Development P/E Price to Earnigs ROA Returns On Assets ROE Returns On Equity SDR Special Drawing Rights TC] Total Connectedness Index TPB Theory Planned Behavior TVP-VAR Time-Varying Parameter VAR Model USD United States Dollar VECM Vector Error Correction Model VND Vietnam Dong LIST OF FIGURES Figure 4. Stock return Of VCB .------cssc+techttrHHtrHHHHHHH HH1. Stock return Of BID u. Stock return Of CÏT.
Stock return Of TCB. Stock return Of TPB o. Stock return Of VPB. Stock return Of VIB.
Stock return Of STB. Stock return Of SSB. Stock return Of SHB. Stock return Of OCB.
Stock return of MSB Figure 4. Stock return of MBB Figure 4. Stock return Of LPB ou. Stock return of HDB Figure 4.
Stock return Of E[B. Stock return Of ACB. Stock return Of BAB. Dynamic total conneCt€dn©SS uu.
Net directional CONNECtECNESS .cessssesssssecsssssceesssssesssecsesseessesssssseeseesseeseeseesseeseessecaeesseesesseeseeseesesseeaseeneeaeness 55 LIST OF TABLES Table 4. «cv tt HH HH HH HH1 H11 11 T111 1111111111111. Averaged dynamic connectedn©SS. -- «-cscsx+rkrkittkrEkitr H1 0111111 Table 4.
Research background Bank stocks are still one of the attractive investment channels for domestic and foreign investors. Foreign investors are always interested in the banking sector in Vietnam and are willing to pay more for the market value. Currently, banking stocks account for the largest proportion on the Ho Chi Minh Stock Exchange (HOSE) with a market capitalization of$8. The banking industry in Vietnam has become increasingly prominent in terms of financial criteria compared to other ASEAN markets such as Indonesia, Malaysia, Philippines, Singapore and Thailand.
Investors can consider other criteria such as bad debt ratio, or some policies may change that makes the banking industry sometimes difficult. But the banking market with a low rate of people using services and a huge shift, from using cash to using banking and digital finance transactions will be an opportunity for any bank. However, this recovery is not really sustainable because the risk factors are still hidden. This makes investors feel confused and difficult to handle when deciding whether to invest in banking stocks or not.
The banking sector is still the industry group that attracts huge investors in the market. The liquidity of this industry group is always the largest, possibly accounting for 30- 40 transaction values of the whole market. Therefore, the growth or price drop of the banking sector will have a great impact on attracting cash flow to the market. Currently, there are not many research related to the factors affecting the stock price of the banking industry during the COVID-19.
Therefore, examining the factors affecting the stock price of commercial banks in this period is necessary for investors. Studying bank stocks is extremely important to many stock market stakeholders. First of all, considering the overall impact of the pandemic on the market value of these stocks. It has become essential for investors to analyze, evaluate and make informed market participation or portfolio management decisions.
In addition, understanding and assessing the impact of the COVID-19 pandemic on stock price fluctuations in the market is necessary for commercial banks to make capital mobilization decisions or dividend policies in the context of the COVID-19 pandemic. To be able to pose the research problem correctly, the author has constantly researched and researched from previous research works of reputable authors along with studies on the impact of the COVID-19 pandemic to the stock market in general and banking stocks in particular. Up to now, only a handful of in-depth studies in 11 Vietnam have focused on the impact of the pandemic on banking stocks, in which, one study on the impact of each peak period of the pandemic. The COVID-19 pandemic to banking stocks in 2020 has shown different reactions of investors during the three major blockades of the year (Phuong, 2021).
This research helps investors to have better judgmentsand reasonable policies when deciding to invest in banking stocks. The first focus of this research is to identify, consider and determine the extent of the connectedness in the prices of the banking stocks in Vietnamese stock market from 2019 to 2022, and to evaluate the influence of COVID-19 on such connectedness. Therefore, the topic "Examining the impact of COVID-19 on the connectedness among Vietnamese bank stock prices" is selected to conduct the research. Research objectives: The objective of the research is identify, consider and determine the extent of the connectedness in the prices of the banking stocks in Vietnamese stock market from 2019 to 2022, and to evaluate the influence of COVID-19 on such connectedness.
Research questions: - What factors can affect stock prices on Vietnam's stock market in recent years? - Is there a connectedness in stock prices of commercial banks on Vietnam's stock market? - How does the COVID-19 influence the connectedness in stock prices of commercial banks on Vietnam's stock market? 1. Research scope - Time range: The price movement of the listed commercial bank shares in the two years 2021-2022. - Spatial scope: Banking stocks on the stock market in one country, Vietnam, including 18 commercial bank codes listed in 2 years during and after the COVID-19 pandemic. Structure of the thesis - Chapter 2: Research overview and theoretical basis about impact of COVID-19 on Vietnam’s bank stock prices - Chapter 3: Data descriptions and research methods - Chapter 4: Results of impact of COVID-19 on Vietnam’s bank stock prices - Chapter 5: Conclusion 12 CHAPTER 2: LITERATURE REVIEW 2.
Models to valuate stock prices Dividend Discount Model (DDM) One of the oldest and most trusted models in financial theory is the Dividend Discount Model (DDM), also known as the Gordon Model (Gordon 1962). The DDM is used to calculate the intrinsic value of a firm’s common equity based on three simple inputs: the next dividend the firm will pay (D1), the rate by which dividends are expected to grow moving forward (g), and the return investors require for buying the firm’s common stock (r). The model as taught in the business school curriculum is: ^ D Py = + whereg <r (1) T0 This is the simplified form of the model. The model in its original form shows that the intrinsic value is derived as the present value of the firm’s expected future dividends: ~ <1", (1+ø)*1 Po =) ar where g <r (2) t=1 The proof for how equation (2) is simplified to equation (1) is given in Appendix A.
The model makes two basic assumptions: that both the required return on the firm’s common stock and the dividend growth rate are constantly moving forward. The required return on common equity (r) is a function of the market’s perception of the relative riskiness of the firm’s cash flows, influenced by the riskiness of the firm’s capital investments and the general level of risk aversion in the market. Thus, barring a significant event in the firm or in the general economy, r changes slowly if at all. The dividend growth rate (g), while influenced by those same risks, is also driven by the firm’s dividend policy.
Dividend increases tend to be “sticky”, as rescinding them sends a negative signal to the market that is ultimately realized via a decrease in the firm’s stock price. Thus, the dividend growth rate tends not to fall, even when earnings decline. At the same time, g only tends to increase when the firm’s executives believe the increase is permanent. 13 e Enhancing the DDM Whena firm (or industry) is relatively young, the economy offers many investment opportunities that provide returns higher than the firm’s cost of capital, thus creating substantial growth.
During this phase, it is common for the firm’s stock price to rise faster than the firm’s earnings, reflected in a higher P/E ratio.