It will take the Vietnamese government three to five years to deal with toxic loans related to the Van Thinh Phat-Saigon Commercial Bank (SCB) scandal and repair the damage caused, said Nguyen Quang Thuan, chairman and founder of Hanoi-based FiinGroup, a leading financial data provider in Vietnam.
At a seminar on Vietnam’s macroeconomy and stock market on Wednesday, Thuan said that the scandal had rocked the local stock market in October 2022 when Truong My Lan, chairwoman of real estate giant Van Thinh Phat, was arrested for her role in a corporate bond scam, but its spillover effects on shares appear to be over.
Lan has been accused of appropriating over VND304 trillion ($12.53 billion) from SCB through illegal loan contracts. The Ministry of Public Security's investigative agency has proposed prosecuting Lan for embezzlement, giving bribes, and violating regulations on banking operations.
Unlike market reactions when Lan was arrested, Vietnam’s stock market seems to have been immune to news of Lan’s wrongdoing. The VN-Index, the benchmark gauge of the Ho Chi Minh Stock Exchange, has been in positive territory since the start of this week.
Regarding Vietnam’s macroeconomic outlook, Thuan commented that the economy will be driven by four factors in 2024, which are a recovery of exports, continued robust foreign direct investment, a rebound of domestic consumption, and a strong pickup of public investment disbursement.
On the downside, a slower than expected recovery of the U.S. and Chinese economies may negatively affect Vietnam’s performance given the fact that the U.S. is its largest export market and China is one of its largest foreign investment sources.
On the domestic front, headwinds may stem from a stalled real estate market, firms facing prolonged difficulties in mobilizing capital, and troublesome policy implementation, Thuan added.
Stabilized corporate bond market
Speaking at the seminar, Tran Phu Viet, head of analysis and product manager at FiinGroup, highlighted that the local corporate bond market has become healthier after a period of doldrums and elimination of weak players.
As investors become more aware of risks, the corporate bond market will see fewer violations and less volatility in the coming time, Viet added.
He pointed out that chances exist out there as a number of leading firms and banks offer attractive coupon rates.
Negative factors impeding the corporate bond market are lackluster participation of non-financial institutions and retail investors, and the dim outlook of several industries such as real estate and energy, Viet said.
For the bond market to gain more investor confidence in the long run, Thuan suggested more efforts from issuers, more enabling policies and higher transparency.
On the securities market, Do Hong Van, head of data analysis at FiinGroup, noted that Vietnam’s P/E ratio is currently lower than the average since 2015, but that of the non-financial sector (excluding real estate) is peaking.
Van pointed out the differentiation of the recovery of corporate earnings, recommending investors be prudent.
The industries that will see earnings growth are information technology, oil and gas, seafood, garment and textile, steel, chemicals, and industrial real estate. On the contrary, the banking, residential property, retail, fertilizer, and drinks sectors are expected to report lower profits, Van said.