Vietnam's stock market valuation is looking very attractive with the price-to-sales (P/S) ratio forecast to fall to below 1.2 with positive revenue growth forecasts for 2024, according to Pyn Elite Fund, a Finnish investment fund.
In a recent letter to investors, portfolio manager Petri Deryng said that the Vietnamese stock market is on a positive trajectory. Closing the session last Friday, the VN-Index, which represents the Ho Chi Minh Sock Exchange (HoSE), had reached 1,183.37 points, up 17.5% compared to the beginning of the year.
However, the Vietnamese economy still faces many difficulties in the context of declining consumption and exports, Deryng noted.
According to Pyn Elite, policies released by the government and the State Bank of Vietnam will determine the stock market outlook for next year. Domestic interest rates have decreased significantly and will continue to fall. Over the past eight months, the 10-year government bond yield has halved from 5% to 2.5%, reflecting a significant drop in capital interest rates in Vietnam's domestic market.
The interbank overnight interest rate has dropped to 0.17%, showing strong liquidity in the financial market. 12-month deposits made in late 2022 will mature in late fall of 2023, and will likely be channeled into higher-yield investment channels, such as stocks.
Pyn Elite Fund believed that Vietnam's economy will definitely accelerate thanks to new policies, and 2024 will again be a year of strong growth for the Vietnamese economy. The fund held that domestic cash flow will run into stocks and that market indexes will continue to recover in the near future. This optimistic sentiment may continue until 2024.
It also analyzed that Vietnam's economic downturn is closely related to interest rates and liquidity in the country. Once the economy returns to normal, the stock market will be able to trade at a P/S ratio of 2 or more. The ratio is currently only 1.35 because revenue growth in the first quarters of the year was not very positive.
In July 2023, Pyn Elite Fund's performance rate reached 5.2% thanks to the recovery of some stocks that account for a large proportion in its portfolio, including VHM of real estate giant Vinhomes, VRE of Vincom Retail, ACV of Airports Corporation of Vietnam, and MBB of MBBank. However, this figure was still lower than the VN-Index gain of 9.2%.
The three worst performing stocks in its portfolio were STB of Sacombank (-2.9%), VEA of Vietnam Engine And Agricultural Machinery Corporation (-0.3%), and CTG of VietinBank (+1.7%).
Pyn Elite Fund added that in the first half of 2023, the 16 core stocks in its portfolio had an average earnings growth of 32% year-on-year, while total returns from companies listed on the HoSE decreased 10% over the same period last year.