On March 22, US President Donald Trump signed a memorandum that would impose 25 tariffs on up to US$60 billion (Bt1.87 trillion) in annual imports from China. In retaliation, China announced similar tariffs on about $3 billion of US imports.

Although there is still speculation that China may expand its target to a broader range of US business interests, international experts believed the current trade spat between the two economic powers will be resolved through ongoing negotiations rather than moving toward a full-fledged trade war.

This issue, however, continues to weigh on investor sentiment and raise near-term volatility in global markets.

Vietnam’s securities market has performed im0pressively, with the benchmark VN-Index declining only twice in the past three weeks and actually gaining 4.5 per cent since March 9. The VN-Index has continued setting new record highs last week.

According to Nguyen Duc Hung Linh, head of analysis at Saigon Securities Inc, Vietnam’s stock market is independently strong and that is helping it to offset the short-term impact of the US-China trade spat. Working in its favour are the escalating equitisation process of State-owned enterprises (SOEs), listings of big companies, the quick expansion of the local market and its possible upgrading to emerging market status.

Since early 2017, most of the companies that recently had large IPOs have seen their values increase, bringing profits to both domestic investors and foreign funds.

This trend is expected to continue in 2018 and more good investment opportunities will be offered for foreign investors in the future, Linh told a March 29 cafef.vn online seminar on risks and opportunities for Vietnamese businesses amid the threat of a global trade war.

Exchange-traded funds (ETFs) were net buyers of 5.4 trillion dong (Bt7.39 billion) in the Vietnamese market in January but from early February until now, they have withdrawn about 1 trillion dong.

According to Linh, domestic money inflows have remained strong and together with stable macroeconomic conditions, the market will continue to grow.

Limited impact

Responding to concerns over escalating trade tensions between the US and China and its impact on Vietnam, Tran To?n Thang, head of the World Economic Department of the National Centre for Socio-Economic Information and Forecast (NCIF) under the Ministry of Planning and Investment, said: “No one wins in a trade war. All parties in this war will lose.”

According to Thang, a large-scale trade war will not likely occur as all parties are aware of the consequences but minor conflicts can happen.

If the conflict occurred only between the US and China, Vietnam would have a good chance to export to the US, Thang said. He added that on the other hand, if China could not export to the US, it would boost its exports to other countries, including Vietnam.

However, as Vietnam’s economic openness as measured by its import-export rate is rather high, Thang warned that the country might find it difficult to achieve growth targets if a real trade war broke out.

According to Nguyen Huy Do, marketing director at Vietnam-Italy Steel Co, Vietnam can increase exports to other markets when the Comprehensive Progressive Trans Pacific Partnership (CPTPP) takes effect in the near future.

The CPTPP has 11 member countries. Vietnam has the most favourable conditions for exporting garments and steel, said, adding that through the CPTPP Vietnam will gain a good opportunity to export without challenge from its biggest competitor, China.

In addition, Vietnam is a developing country, so the demand for construction steel is rising and the industry is less reliant on exports.

The steel industry witnessed a growth rate of 18 per cent in 2016 and 12-13 per cent in 2017.