The impacts of the Covid-19 pandemic, policy responses and macroeconomic fundamentals on market risks across sectors in Vietnam

Abstract

Vietnam has undergone four waves of the Covid-19 pandemic in 2020 and 2021, which have posed significant market risks to various sectors. Understanding the market risk of Vietnamese sectors and its changes is important for policy implementation to support the economy after the pandemic. This study measures the sectoral market risks and examines the effects of the pandemic, policy responses and macroeconomic fundamentals on the market risks across sectors in Vietnam. We employ the Value-at-Risk (VaR) and Conditional Value-at-Risk (CVaR) techniques to measure the market risks for 24 sectors from 2012 to 2021. The market risk levels across Vietnamese sectors have changed significantly in response to the pandemic. Oil and Gas and Services sectors show the largest potential loss during the two Covid-19 waves in 2020. The Securities sector is the riskiest sector during the last two Covid-19 waves in 2021. Our results indicate that the new Covid-19 cases reported by the Government increase the market risk levels across Vietnamese sectors. On the other hand, enhancing containment and health policy and reducing economic policy uncertainty result in lower market risk across sectors. We also find that macroeconomic fundamentals such as the exchange rate and interest rate significantly affect the market risks across sectors in Vietnam.