Now good time to accumulate Vietnamese stocks with solid fundamentals: Mirae Asset exec

Now is a good time to accumulate Vietnamese stocks with solid fundamentals, as the market is undervalued, corporate profits have recovered, and the market status is to be upgraded, says Kye Kyung Tae, global business strategy director at Mirae Asset Securities.

Speaking at the "Pho Tai Chinh" (Financial Street) talk show on Monday, Kye noted that in 2024, while the global environment remained challenging, Vietnam's domestic economy saw a strong recovery and macroeconomic stability.

The GDP growth rate reached 7.09%, exceeding the target set by the legislature, positioning Vietnam among the top countries in the region and globally in terms of economic growth.

VN-Index, which represents the Ho Chi Minh Stock Exchange, increased 12.11%, while the market capitalization grew 20%, equivalent to 70% of Vietnam's GDP in 2023. This has helped to strengthen the confidence of businesses, investors, and the general public, he noted.

According to Kye, 2024 was a challenging year due to the U.S. Federal Reserve's slower-than-expected interest rate cuts and the stronger U.S. dollar.

The U.S. economy continued to maintain strong GDP growth, with inflation on a downward trend. This helped the powerhouse attract significant foreign investment inflows, while many other markets, including Vietnam, experienced net foreign capital outflows.

Since the State Bank of Vietnam cut policy interest rates in March 2023, foreign investors had net sold over $4 billion of Vietnamese stocks.

"As a result, domestic individual investors who account for more than 80% of transaction value chose a cautious approach, observing and waiting in 2024," said the Mirae Asset executive.

Kye noted that the ongoing reforms in Vietnam would help the economy continue to grow positively in 2025.

He predicted that public investment will be the main growth driver for Vietnam amidst external challenges. The government has outlined an infrastructure development plan through 2030, including $35 billion for roads, $16.5 billion for airports, $13 billion for seaports, and $10 billion for railways. This plan is supported by ample fiscal space.

The revised Public Investment Law is expected to address the slow disbursement of public investment funds in 2024. Vietnam is set to accelerate public investment in 2025, with investment and development spending in 2025 set to increase by 15.5% compared to the estimated figure for 2024, and by 16.7% over the 2024 plan.

SBV aims for a 16% credit growth in 2025 which is expected to be driven by faster public investment disbursement and further improvements in the real estate sector.

It will strive to maintain the current interest rate levels to support business activities, thanks to well-controlled inflation. With these factors in place, consumption, which accounts for 50-55% of GDP, is expected to accelerate along with the economy.

According to Kye, the Vietnamese government has set a goal of developing the financial market, including increasing the stock market capitalization to 100% of GDP and the corporate bond market size to 20% of GDP by 2025.

After a significant correction in 2022, the stock market capitalization decreased from nearly 100% to 70% of GDP in 2023. The figure reflects that Vietnamese companies primarily rely on bank credit rather than raising capital through stocks and bonds.

The government is proactively implementing solutions to develop the stock market through improvements in the legal framework, market infrastructure, and corporate governance standards.

To enhance the scale, liquidity, and diversification of the stock market, the cabinet is also considering strategies such as divestment of state capital from listed companies, promoting initial public offerings (IPOs), and simplifying the listing process. Upgrading to an emerging market status by 2025 is an important goal.

If these efforts continue, FTSE Russell could upgrade Vietnam to an emerging market status in September 2025. The upgrade is hoped to help revalue the Vietnamese stock market, thanks to new capital inflows from funds and exchange-traded funds (ETFs) that track this index.

Looking back, Kye noted that the Vietnamese stock market has gone through five cycles, with the P/E ratio ranging from a low of 11 times to a peak of over 20 times. The stock market has continued to rise since bottoming out in November 2022. Currently, the VN-Index is trading at a P/E ratio of 14.8 times, which is lower than the long-term average of 17 times, indicating that its valuation remains attractive.

Moreover, corporate profits are on a recovery trajectory, with a forecast 16% growth in 2025. Public investment and credit growth are also expected to accelerate. In particular, the early passage of three real estate-related laws in August 2024 has paved the way for a property market recovery in 2025. “Therefore, this is a good time to accumulate stocks with solid fundamentals,” he noted.

Regarding investment strategies, Kye emphasized that portfolio diversification and preparation for significant market changes are key factors. In 2025, it will be important to closely monitor the Fed’s interest rate cut path and the U.S. trade policy.

“Investors should also be cautious when the market becomes overly optimistic. Conversely, when the market becomes overly pessimistic, it is an opportunity to accumulate stocks at low valuations,” he advised.