Vietnam's economy has many bright spots including solid GDP growth and well managed interest rates, factors that promote long-term growth and attract foreign investors, a VinaCapital executive says.
Andy Ho, general director of VinaCapital's Investment Council, said at the 2023 Investor Conference Monday that more foreign investors were coming to Vietnam now because they feel more confident about developments in the Vietnamese market and economy.
The conference, organized by VinaCapital in Ho Chi Minh City, attracted more than 150 international investors from industrial corporations, large financial institutions, and start-up technology companies. This was the largest number of participating investors since the first event in 2005.
He said the economy has many bright spots, including GDP growth. Vietnam's GDP growth rates of more than 8% in 2022 and an estimated 4.7% in 2023 make for an average 6.5% in two years, which is the highest in the world. This has also been the average speed of growth in Vietnam for many years.
Furthermore, during the two years of the Covid-19 pandemic, 2020 and 2021, many countries and regions in the world experienced contraction while Vietnam still recorded positive growth.
Another bright spot is that interest rates are being managed well and have cooled down. A few months ago, the average deposit interest rate was 10-12% per year; now it has dropped to 5.5-6.5%. This helps cash flow move to securities and real estate channels instead of just staying at banks because of high deposit interest rates.
“Foreign investors often ask VinaCapital whether Vietnamese real estate is like China's or not. We confirm that it cannot be the same. Vietnam's real estate market only accounts for 8% of GDP, while China's accounts for 20%. The number of empty houses in Vietnam is nonexistent, and there is even a shortage of mid-end and affordable houses. On the contrary, China has countless surpluses and many "ghost" cities," Andy said.
Besides, Vietnam has many other factors that promote long-term growth. The urban population percentage in Vietnam is 40%, compared to 70% in China. The trend of shifting to urban areas in Vietnam continues. Considering that 40-50 years is the age to spend the most money, Vietnam still has 10-20 years left, and in this period of time, the number of people in this age group will keep increasing.
Nguyen Hoai Thu, CEO of VinaCapital Securities Investment Fund, said Vietnam's current market valuation was another reason for foreign investors finding the country attractive.
"Vietnam's market valuation is at an attractive level. Statistics over the past 10 years show that the VN-Index has only experienced P/E and P/B levels as low as the current time. Vietnam's VN-Index valuation is also very low compared to markets in the ASEAN region, but the valuation discount is at the highest level in 10 years."
While analysts have said that the stock market will continue to correct in the short-term, Thu said she believed this was normal because the market has experienced strong growth recently.
“As of end-August, the VN-Index had increased about 20% compared to the beginning of the year. In September, the market had correction sessions but still maintained its upward momentum of about 15%. Because the market has been very excited recently, it needs a short-term adjustment to continue."
According to Thu, the Vietnamese stock market has a lot of potential in the long term. It will continue to benefit from low bank deposit interest rates. Stocks will also increase according to the economic growth cycle, she said, explaining that Vietnam's economy is forecast to recover well in 2024 with GDP growth returning to about 6.5% per year.