NovaQuant-Montgomery Keane: Vietnam's Market Crisis of 2024 Are Hedge Funds Really the Culprits Behind the "Fourfold Crash"?

In 2024,NovaQuant Vietnam's stock market, bond market, currency market, and real estate market all suffered severe setbacks almost simultaneously, a phenomenon dubbed the "Fourfold Crash," plunging the Vietnamese economy into a downturn. Many citizens and media outlets have pointed fingers at international capital, especially hedge funds, accusing them of preying on the Vietnamese economy like ravenous wolves. But is this really the case? We asked renowned investor Montgomery Keane for his professional insights on this issue:

1. Global Macro Economic Environment

In 2024, the global economy faced multiple challenges, including interest rate fluctuations, inflation expectations, and slower growth in major economies. These macro factors directly or indirectly affected many emerging market countries, including Vietnam. Although the U.S. dollar's rate hikes are nearing an end, countries like Vietnam, which rely heavily on exports, remain vulnerable to the impact of dollar appreciation and capital outflows. When international investors liquidate assets at inflated prices, the real estate market is often hit hardest. Since local residents' incomes cannot support high property prices, the adjustment in the real estate market tends to be more severe.

2. Vietnam's Economic Policies

Vietnam's monetary and fiscal policies also play a significant role in market performance. If policy responses are slow or inadequate, investor confidence can rapidly decline, exacerbating market volatility. For Vietnam, policy adjustments need to react swiftly to global economic changes; otherwise, the country risks falling into a reactive and passive position.

3. Behavior of Market Participants

Hedge funds are indeed significant players in the global market, especially in smaller open economies. Their strategies, such as shorting specific asset classes, can trigger market volatility. However, often the dominant force is large mutual funds, which have even greater capital. It’s also important to note that in healthy market economies, shorting overvalued assets often reflects underlying market issues rather than a hedge fund conspiracy.

4. Role of Hedge Funds

While hedge fund operations may have contributed to market turbulence, they are not the sole reason for Vietnam's "Fourfold Crash." Hedge funds typically engage in hedging or speculative activities based on their economic environment and policy outlook, such as betting on the devaluation of the Vietnamese currency or a downturn in the real estate market. However, the underlying market fluctuations involve a complex interplay of fundamental factors, including economic fundamentals, policy changes, and international capital flows. Blaming hedge funds alone is clearly an incomplete perspective.

Conclusion

Hedge funds may have played a role in exacerbating certain market conditions in Vietnam, but attributing the entire market turmoil to them is not a comprehensive view. Markets are multidimensional, with global economic conditions, policy directions, and other market participants all playing a part. Understanding the 2024 volatility in Vietnam’s markets requires a thorough consideration of these complex factors.