MINISTRY OF EDUCATION AND TRAINING THE STATE BANK OF VIETNAM HO CHI MINH UNIVERSITY OF BANKING LUU THANH HUONG IMPACT OF COVID-19 ON VIETNAM’S STOCK MARKET GRADUATION THESIS MAJOR: FINANCE – BANKING CODE: 7 34 02 01 HO CHI MINH CITY, 2022 MINISTRY OF EDUCATION AND TRAINING THE STATE BANK OF VIETNAM HO CHI MINH UNIVERSITY OF BANKING NAME: LUU THANH HUONG STUDENT CODE: 050607190189 CLASS: HQ7-GE16 IMPACT OF COVID-19 ON VIETNAM’S STOCK MARKET GRADUATION THESIS MAJOR: FINANCE – BANKING CODE: 7 34 02 01 ACADEMIC ADVISOR DR. NGUYEN DUY LINH HO CHI MINH CITY, 2022 i ABSTRACT The outbreak of COVID-19 hurt the socioeconomic activities and stock markets of many countries around the world. Although Vietnam is one of the countries that responded well to COVID-19, its impact on the economy is not small. Especially for the Vietnamese stock market.
The purpose of this paper is to examine the impact of the COVID-19 pandemic on the Vietnamese stock market. Event Study is the main methodology of this thesis. The three events selected for the study include: (i) On March 30, 2020, the Government issued a directive to implement nationwide social distancing; (ii) On July 28, 2020, announced the implementation of social isolation in Da Nang; and (iii) On July 9, 2021, Ho Chi Minh City applied directive 16. The paper shows that the effects of the three events on stock prices are inconsistent.
The cumulative abnormal return (CAR) is negative after the first and third events are announced, but the CAR is positive after the second event is announced. Of the three events, the stock price response to the first event was insignificant, while the other two events were statistically significant after the event. The results from this study add further insights into the effects of disease on stock price responses. ii DECLARATION I honestly declare that this graduation thesis entitled ―Impact of COVID-19 on Vietnam’s stock market‖ is the result of my original research work under the guidance of Dr.
Nguyen Duy Linh, my academic advisor. This thesis has never been submitted for a bachelor's degree anywhere else before. This thesis is the result of the author's own research, and the results of the research are trustworthy. The thesis does not consist of any previously published content or content made by others, except for citations that are fully cited in the thesis.
Ho Chi Minh City, November 2022 Luu Thanh Huong iii ACKNOWLEDGMENT First and foremost, I would like to express my sincere thanks to Dr. Nguyen Duy Linh, the supervisor who directly guides my thesis. From the comments, the guidance is extremely valuable. It has created the best conditions for me to complete this thesis.
I would also like to express my sincere thanks to the teachers at the Ho Chi Minh University of Banking, who devotedly imparted knowledge during my study at the school. I am also very grateful to my family, friends, and relatives, who have always been by my side to encourage me throughout the process of completing the thesis. iv TABLE OF CONTENTS ABSTRACT. iii TABLE OF CONTENTS.
iv LIST OF ABBREVIATIONS. vii LIST OF TABLES. vii LIST OF FIGURES. Research situation related to the thesis content.
Research subject and scope of study .2 Scope of the research .1 The theory efficient market .2 The theory of behavioral finance .3 The random walk theory of stock prices. Review of previous studies .1 Studies in the world .2 Studies in Vietnam .17 CONCLUSION OF CHAPTER 2. 29 CONCLUSION OF CHAPTER 3. Overview of the impact of the COVID-19 pandemic on the international market.
Overview of the impact of the COVID-19 pandemic on Vietnam's stock market. 36 CONCLUSION OF CHAPTER 4. Discuss the results .1 The first event: On March 30, 2020 .2 The second event: On July 28, 2020.3 The third event: On July 9, 2021. CONCLUSIONS AND RECOMMENDATIONS.
56 Appendix 1: 30 firms that were in the VN30 basket at the time of the research.56 Appendix 2: Results of abnormal return and cumulative abnormal return.57 Appendix 3: Hypothesis testing. 59 vii LIST OF ABBREVIATIONS Abbreviations Definition ADB Asian Development Bank AR Abnormal Returns CAR Cumulative Abnormal Returns GDP Gross Domestic Product ODV Open Development Vietnam WHO World Health Organization LIST OF TABLES Table 2.1: Previous research results.1: Abnormal returns (AR) and t-test results for three lockdown times due to COVID-19 in Vietnam.2: Cumulative abnormal returns (CAR) and t-test results for three lockdowns due to COVID-19 in Vietnam. 41 LIST OF FIGURES Figure 3.1: The cumulative abnormal return (CAR) findings for Event 1.2: The cumulative abnormal return (CAR) findings for Event 2.3: The cumulative abnormal return (CAR) findings for Event 3. Introduction The outbreak and spread of the novel coronavirus disease (COVID-19) worldwide has severely affected production and people's lives in general.
Economies around the world are currently facing serious challenges due to the COVID-19 outbreak. Due to fear and uncertainty, and to a reasonable assessment that corporate profits are likely to be lower due to the impact of COVID-19, the global stock market has erased about $6 trillion in wealth for the week from February 24 to February 28, 2020. Particularly for the Vietnamese stock market, right in the first outbreak of the outbreak, the VN-Index decreased by 36% in value compared to the end of 2019 (1024 points down to 650 points). He et al.
(2020) believes that the impact of COVID-19 on the economy is not the cyclical volatility of traditional economic development. The short-term catastrophes caused by the pandemic also surpass any endogeneity and extreme events of the past. Assessing and understanding the economic impact of COVID-19 has become a critical issue. The traditional economic and financial theory holds that stock prices are affected by market and firm characteristic-based factors.
Companies in the same industry face the same regulatory and policy environment and similar macroeconomic conditions. When faced with changes in the economic environment, the operating conditions of companies in the same industry are highly correlated (Moskowitz & Grinblatt, 1999). According to the theory of behavioral finance, in addition to the basic value of stocks, emergencies will have an impact on investors’ psychological and behavioral factors, which in turn will have an important impact on stock prices. Lee and Jiang (2002) believe that investor optimism will reduce earnings volatility, while investor pessimism will increase earnings volatility.
Therefore, the outbreak of COVID-19 will have an impact on the economic 2 environment, which will affect investor sentiment, causing stock price changes (He et al. The COVID-19 pandemic, a public health emergency, has not only caused infection and death to people but also disrupted the stock market. Vietnam is one of the countries responding most effectively to COVID-19. As soon as COVID-19 was reported, the Government convened and promptly adopted blockade regulations to stop the disease's spread.
As the pandemic spreads, new policies are established. Research on the impact of the COVID-19 pandemic on the Vietnamese economy and the stock market has been widely publicized. Specifically, the study of Vo Duc Tam & Vo Van Ban (2021) and the study of Lai Cao Mai Phuong (2021). However, most studies in Vietnam only study the period before and during the pandemic outbreak, and research activities are only researched for each industry, so there is no general overview of the whole market.
Different industries are affected by the pandemic to varying degrees, and their ability to respond varies. To comprehensively assess the impact of COVID-19 on the stock prices in Vietnam, the author decided to apply the Event Study method to examine the stock prices of these companies. Therefore, the topic "Impact of COVID-19 on Vietnam's stock market" was selected by the author for the thesis. Research situation related to the thesis content According to He et al.
(2020), In the capital market, emergencies often affect investor behavior by affecting investor sentiment, which ultimately affects stock prices. The earliest event study proposed by Fama et al. (1969) can be used to understand whether market security prices are related to specific events. In recent years, event study has been widely used in the field of accounting and financial practice and has gradually become a common research method in business studies.
Up to this point, many domestic and foreign authors have conducted research on the impact of COVID-19 on the stock market. In China, He et al. (2020) pointed out that the COVID-19 pandemic seriously affected China's traditional industries 3 (transportation, mining, electricity & heating, and the environment), but it creates opportunities for high-tech sectors to develop, such as the manufacturing industry, information technology, education, and healthcare. Alam et al.
(2021) show that, on February 27, 2020, after the announcement of the COVID-19 outbreak in Australia, the food, pharmaceutical, and healthcare industries had an unusual return, which is impressively positive. However, 10 days after the announcement of the event, the transportation sector performed poorly, while the telecommunications, pharmaceutical, and healthcare sectors performed well. In Vietnam, Lai Cao Mai Phuong (2021a) researched the banking sector index 250 days before each event and has shown that the stock price movements of the banking sector react differently to each event. However, research studies in Vietnam focus primarily on examining the impact of COVID-19 on each specific industry.
Studies in Vietnam often do not analyze broadly across all sectors. Therefore, this study will continue to inherit, update, and study the impact of the COVID-19 epidemic on the stock prices of companies in the Vietnamese stock market.1 Overall objective The goal of the study was to examine how the COVID-19 pandemic affected the stock values on the Vietnamese stock market. On that premise, the author up with some suggestions to assist investors in making more sane investing choices.2 Specific objectives Impact of COVID-19 on Vietnam's stock market. Stock prices are reflective of published information related to COVID-19.
Proposing solutions to assist investors in limiting risks when making stock market investment decisions. Research questions Question 1. How does the COVID-19 pandemic affect the Vietnamese stock market? Question 2. How does the stock price reflect the published information related to COVID-19? Question 3.
What recommendations should be given to help investors minimize risks when making investment decisions on the stock market? 1. Research subject and scope of study 1.1 Research subject The COVID-19 pandemic and stock prices of firms listed on the Vietnamese stock exchange.2 Scope of the research Regarding space: Share prices of companies in the VN30 index. Regarding time: The period from September 2019 to April 2021. Research methods In this thesis, the author uses the Event Study method.
The event method uses a measure of the extraordinary returns arising from events. Through the value of extraordinary earnings, it is possible to estimate the market's response to changes in stock prices or measure changes in the performance of a business when significant events occur. An event is defined as an action or phenomenon related to an organization that is made available to the public. Events are usually divided into two types: random events (natural disasters, epidemics, wars.) and regular events (business announcements, dividend payments.
In this study, the COVID-19 outbreak was a random event. Specifically, three times that the Government announced social distancing information. The first time was on March 30, 2020, when the 5 Government issued a directive to implement nationwide social distancing; the second time was on July 28, 2020, when announcing information on implementing social distancing in Da Nang; the third time was on 9 July 2021 when Ho Chi Minh City applies directive 16. These three days were chosen because they showed that the number of COVID-19 cases grew fast and there was infectiousness in the population.
If the COVID-19 outbreak is not contained quickly, it will represent a major threat to public health and have far-reaching implications. This thesis uses the Event Study method developed by Fama et al.