Great economic data to help VN-Index fly over 1,300 this year: PYN Elite

The benchmark VN-Index of the Ho Chi Minh Stock Exchange may break out when the resistance threshold of 1,300 points is breached, supported by already published economic data, said Petri Deryng, portfolio manager of Finland-based PYN Elite.

The VN-Index has been hovering between 1,200 and 1,300 points for some time and closed nearly flat at 1,280.93 on Wednesday.

In a newsletter in June, Petri Deryng had anticipated the VN-Index to reach 1,700 points by the end of this year, much higher than a consensus of 1,400-1,500 by local securities companies. However, the gauge has been moving sideways since and has failed to break the 1,300 resistance zone several times.

In the latest note, the portfolio manager highlighted a series of good news from Vietnam lately, including the acceleration of industrial production, the expansion of exports, and a significant trade surplus.

High inflation in the U.S. kept interest rate expectations high from the beginning of the year until the end of July, which caused the Vietnamese dong to weaken by about 4%. “There has been a clear shift in market views in August, and we believe that the Vietnamese dong will strengthen during the second half of the year,” he noted.

The Vietnamese stock market trades at a modest forward P/E ratio of 12x. The State Securities Commission, the country’s stock market watchdog, has recently announced new draft regulations that allow pre-funding to be waived in stock trading.

If the change is implemented, the index house FTSE could have the opportunity to move forward with its decision on Vietnam's market status from a frontier market to an emerging market. “This, together with the waiver of pre-funding for stock transactions, would make Vietnam a more attractive market for foreign investors,” he commented.

Modest interest rates outlook and strong earnings growth should lead the market to perform, Petri Deryng said, anticipating a level of P/E at 10x for next year's valuation.

PYN Elite has been investing in Vietnam since 2013 and has allocated all of its equity investments in the Southeast Asian country. The fund had €789 million ($880 million) worth of assets under management as of end-July.

The fund boasts that its NAV has gained +16.3% since the beginning of the year, outperforming an increase of 13.8% of the VN-Index in the same period.