Vietnamese stocks set to recover further despite virus resurgence

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Despite the latest wave of Covid-19 in Vietnam, the country’s benchmark is the best performing in the region with a gain of 21% this year. Analysts say he still has to run.

The Vietnam Ho Chi Minh stock index could rise by up to 12% more to reach 1,500 points by the end of the year, analysts say, supported by demand from retailers for equities at relatively attractive valuations.

Local investors continued to grab stocks despite domestic coronavirus outbreak, with more than 4,000 cases of local viruses reported since the end of April, three times more than new cases last year. Last month, the index gained more than 7%, the highest in the region.

This compares to a 25% collapse in March of last year when the global pandemic broke, and a drop of around 4% in January when another wave hit the country.

Stocks have remained resilient in part thanks to government efforts to contain the outbreak and demand from Vietnamese taking advantage of low interest rates. The market value of Vietnamese stocks hit an all-time high on Monday, at over $ 1 billion, as retail traders pumped funds into the market.

Tuesday, the main exchange interrupted the discussions in the afternoon while turnover jumped up. The VN Index is trading at around 15 times the estimated earnings for next year, compared to more than 16 times for the MSCI Asia-Pacific Index.

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Returning foreign investors could also generate more earnings after having unloaded the country’s shares for an eighth consecutive month in May, a record. Stephen McKeever, head of the institutional clients division of Ho Chi Minh City Securities Corp., says he expects net fund flows to turn positive by the end of 2021.

Vietnamese stock market value hits new high

Here are some views from analysts on the market:

Stephen McKeever, Head of Institutional Clients Division at Ho Chi Minh City Securities Corp. :

  • Vietnamese stock market is backed by liquidity
  • Fundamentals such as economic growth and valuations are very favorable
  • Expect Vietnamese companies to report nearly 30% profit growth this year
  • Level 1,500 targets for the VN index for the end of 2021

Quynh Cao, director of institutional sales at SSI Securities Corp. :

  • See a gain of around 30% year-over-year for the VN index in 2021
  • “Unprecedented moment” for the national stock market
  • Capital inflows from local investors more than offset outflows from foreign investors
  • A strong macroeconomic environment and low interest rates will continue to support business growth and facilitate mergers and acquisitions opportunities
  • Brokerage firms have increased their capital to be injected into the market via margin loans
  • Correction risk persists as we enter a slower news period and brokers’ margin loan books are full

Andrew Brudenell, Head of Frontier Markets Equities based in London at Ashmore Group Plc. :

  • Vietnam is one of the smaller preferred emerging markets
  • Economic growth has been sustained throughout the pandemic due to well-organized tracking and traceability efforts and lockdowns
  • The nation’s balance sheet is in good shape, foreign direct investment remains strong and infrastructure investment is increasing
  • The population is large, young and still growing, which offers good prospects for consumption
  • The depth and breadth of the market has improved, with more local retail investors taking an interest in it
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