Vietnam bourses 'remain on growth track amid greater caution'

Vietnam’s stock market this year will remain on a growth trajectory, but investors should excercise greater caution as geopolitical tensions, high inflation risks worldwide and Covid-19 give rise to uncertainties, analysts said.

Rising uncertainties

Ta Thanh Binh, director of securities market development at the State Securities Commission, said she expected local bourses to continue growing as positive fundamentals are maintained. “But the performance would not be as strong as last year.”

“Vietnam’s interest rates are likely to be stable at low levels, driving cash flows into the market. The country’s adaption to Covid-19 with effective control of the disease, economic rebound, recovered domestic consumption and a fully-reopened tourism market would beef up corporate prospects,” Binh told a stock market forum hosted by The Investor on Tuesday.

But more complications are expected to weigh on the market. “Covid-19 still an unpredictable factor, rising prices of input materials, stimulus removed and higher interest rates at major economies on inflation concerns, and geopolical tentions following the Russia-Ukraine conflict would eat into corporate profits.”

Increased rates might trigger capital shifting from emerging markets to developed markets.

Binh said the recent rapid expansion of margin loans and surging ratio of transactions by retail investors pose other risks as bad news-driven herd behavior might make the market shake strongly. “Moreover, as the economy recovers, cash flow will tend to shift more towards manufacturing, affecting the flow into the stock market.”

Nguyen The Minh, Ho Chi Minh City-based Yuanta Securities Vietnam’s chief analyst, said corporate profit growth will be the key driving force of market growth this year.

Yuanta estimated the earning per share (EPS) of VN-Index stocks in 2022 will be 21%. The figure at Bloomberg’s estimation is 25% in 2022 and 21% in 2023.

Market liquidity was a bright spot last year, surging to a record daily high of $1.8 billion in November, and the pace continues into this year as retail investor sentiment remains positive, he added.

Vietnamese investors have shrugged off concerns over foreign investors’ continual net selling since last year. Domestic retail investors opened 1.5 million trading accounts in 2021, up 50% against the total of 2017-2020. The tally keeps rising this year to 405,980 in the first two months, equivalent to more than one quarter of last year’s total.

Minh pinpointed challenges similar to what Binh highlighted, but he visions VN-Index would rise to as high as 1,898 points by the year-end. The index closed 2021 at over 1,498 points, up 35.7% against the end of 2020.

Despite the optimism, he said profit-taking opportunity would be lower than last year.

Le Xuan Nghia, Vietnam’s top banking expert, said his biggest hope when it comes to Vietnam’s stock market this year is the return of foreign investors.

“Their net selling is over $3 billion since last year, but our research on the foreign exchange market shows that the money remains here, on their accounts,” Nghia, head of the Business Development and Research Institute, told the forum.

He added the market in 2022 would still be positive, but it could not rally like last year.

Luu Duc Khanh, diretor of investment capability development at VPS Securities, said he believes 2022 would see the market more difficult to invest in, more challenging and require investors to be more patient.

Stocks to invest

Ngo The Hien, director of research at Saigon-Hanoi Securities, said since the stock price level increased very strongly in 2021, investment strategies in 2022 need to be more cautious.

“Investors can explore opportunities in a variety of industries, including those benefiting from the economic recovery package, particularly infrastructure investment firms and construction companies.”

Groups that benefit from the government’s 2% interest rate support package worth VND40,000 billion ($1.75 billion) and have stable output such as textile & garment and seafood also offer good investment opportunities.

Others are logistics, seaports and industrial real estate that benefit from the shift of investment capital from China to Vietnam.

Investors could also consider industries that benefit from post-Covid rebound such as retail, tourism real estate, residential real estate and banking.

Minh from Yuanta Securities Vietnam said his firm considers banking and real estate stocks as groups that would lead the market growth alternatively in 2022. “Consumer goods would also see strong performance from the low base of 2021.”

Vietnam’s stock market is assessed as one of the 10 stock markets with best resilience to the pandemic and best recovery in 2020. VN-Index set new peaks in 2021 and is one of the world’s stock indexes with highest growth.

As of December 28, 2021, the market capitalization reached nearly VND7,729 trillion ($337.7 billion), up 46% against the end of 2020, equivalent to 122.8% of GDP in 2020 and 92% of GDP in 2021.

Market capitalization continued to rise slightly in the first two months of this year, reaching nearly $340 billion on February 28, up 0.2% against the end of 2021 and equivalent to 92.6% of GDP.