Despite Virus Resurgence, the benchmark index of Vietnam is the region’s top performer with a 21% gain this year. Analysts say it has further to run.
The Vietnam Ho Chi Minh Stock Index could rise as much as 12% more to 1,500 points by the end of the year, analysts say, supported by retail demand for stocks at relatively attractive valuations.
Local investors have continued to snap up stocks despite a domestic coronavirus surge, with more than 4,000 local virus cases reported since the end of April – three times more than new cases last year. Last month, the index gained more than 7%, the most in the region.
That compares to a 25% slump in March last year as the global pandemic erupted, and a decline of about 4% in January when another wave hit the country.
Stocks have remained resilient in part due to efforts by the government to contain the outbreak and demand from the Vietnamese making the most of low interest rates. Trading value for Vietnamese stocks climbed to all-time high Monday– at more than $1 billion, as retail traders poured funds into the market.
On Tuesday, the main bourse halted trading in the afternoon as turnover surged. The VN Index is trading at about 15 times estimated earnings for the next year, compared with more than 16 times on the MSCI Asia Pacific Index.
Returning overseas investors could also further drive gains after they offloaded the nation’s equities for an eighth-straight month in May, a record. Stephen McKeever, head of the institutional client division at Ho Chi Minh City Securities Corp., says that he expects net funds flow to become positive by the end of 2021.
Here are some analyst views on the market:
Stephen McKeever, head of the institutional client division at Ho Chi Minh City Securities Corp.:
- Vietnam’s stock market is being supported by liquidity
- Fundamentals such as economic growth and valuations are very supportive
- Expect Vietnamese corporates to report close to 30% earnings growth this year
- Targets 1,500 level for the VN Index for end-2021
Quynh Cao, director of institutional sales at SSI Securities Corp.:
- Sees year-on-year gain of about 30% for VN Index in 2021
- “Unprecedented moment” for nation’s stock market
- Capital inflows from local investors has more than offset outflows from foreign investors
- Solid macro environment and low interest rates will continue to support enterprise growth and facilitate M&A opportunities
- Brokerage firms have ramped up capital to inject into the market via margin loans
- Risk of a correction remains given we are entering a slower news period and brokers’ margin loan books are full
Andrew Brudenell, London-based head of frontier market equities at Ashmore Group Plc.:
- Vietnam is a favorite smaller emerging markets
- Economic growth was sustained throughout pandemic due to well-organized track & trace efforts, and lockdowns
- Nation’s balance sheet is in good shape, foreign direct investment continues to be strong, and infrastructure investment ramping up
- Population is large, young and still growing, which provides a good outlook for consumption
- Depth and breadth of market has improved, with more local retail investors taking an interest
By Nguyen Kieu Giang @ Bloomberg