Continued strong earnings to sustain Vietnam equity market uptrend: HSBC

Vietnam’s equity market uptrend can be sustained if earnings remain strong, says James Cheo, chief investment officer for Southeast Asia and India at HSBC Global Private Banking and Wealth.

Vietnam’s stock exchanges has been one of the better performing markets in Asia so far this year, Cheo said in an HSBC note released Thursday.

The VN-Index, which tracks the Ho Chi Minh Stock Exchange (HoSE), rose 12.2% in 2023 and has gained 11.4% so far this year despite strong selling pressure from foreign investors, exchange data showed.

“Equity valuation is still undemanding. Corporate earnings remain resilient recovering from the trough in 2023,” Cheo commented.

Hanoi-based VNDirect Securities last month projected 2024 earnings of HoSE-listed companies to increase 16-18% year-on-year for the VN-Index to reach 1,300-1,350 points by the year-end, equivalent to a 14-14.2x price-to-earnings (P/E) ratio.

Finland-based PYN Elite Fund has gone further, predicting the index reaching an all-time high of 1,700 points by the end of this year, much higher than the consensus forecasts of 1,400-1,500 points by other brokerage houses.

The VN-Index closed Thursday at 1,259.09, down 0.17%.

Dinh Quang Hinh, head of macro and market strategy at Hanoi-based securities firm VNDirect, told The Investor last week that Q2/2024 corporate earnings were expected to remain positive, providing support and pushing Vietnam’s stock market up.

He recommended that investors pay heed to stocks of corporations performing well in banking, industry and export.

Viet Dragon Securities, meanwhile, advised investors to keep an eye on steel, retail, aviation and banking stocks ahead of the Q2 earnings season.

Higher-than-expected Q1 business results had provided the foundation for the market's recovery in May, the broker said. Besides, cooling U.S. inflation has strengthened global and domestic confidence in an interest rate cut by the Federal Reserve (Fed), it added.

HSBC researchers have said that Vietnam’s economy was poised to remain robust for the rest of 2024 after delivering 5.66% Q1 growth.

“Vietnam continues to be on the path of recovery driven by the turnaround in the global electronics cycle. As a result, industry activity as proxy by purchasing manager’s index, continued to show that manufacturing is expanding. Vietnam’s electronic exports are doing very well,” they commented.

Concurrently, the pipeline of foreign direct investment looked to be healthy due to Vietnam’s attractiveness as an investment destination, they said. While domestic spending presented a mixed picture, tourism was staging a comeback and likely to reach the target of 17-18 million visitors this year.

Inflation remained sticky and near the government’s 4.5% ceiling. An expected delay in the U.S. Fed’s rate cut has created some near-term dollar strength and volatility for the Vietnamese dong, they noted.

“Depending on how global central banks determine their interest rate policies, the State Bank of Vietnam is likely to be cautious with its own rate policy,” they added.