Vietnam shares appealing compared to regional peers: brokerage

The VN-Index, the main gauge that tracks the Ho Chi Minh Stock Exchange, is trading at a forward price-to-earning (P/E) of 9.1x, relatively attractive compared to its regional peers, Tien Phong Securities (TPS) said in a report.

This will be conducive to attracting foreign investment as international players tend to look at markets with low valuations, especially when Vietnam has been striving to have its stock market status upgraded to frontier over the past years, the brokerage house added.

Following the upgrades of relations with the U.S. and Japan, Vietnam’s economy is expected to gain momentum. In addition, corporate earnings are poised to continue recovering after bottoming out in the last quarter of 2022.

“With this valuation, Vietnam’s stock market is in a good position to lure foreign investment,” TPS commented.

TPS researchers continued to highlight favorable factors for capital inflow. Corrections in September and October this year brought the P/E of the VN-Index from a high of 14.87x to 13.29x as of end-November.

What’s more, after four consecutive rate cuts by the State Bank of Vietnam, the rate on 12-month deposits at state-controlled commercial banks has dropped to 5.22%, much lower than a peak of 7.4% before the banking regulator started loosening policy.

Other factors supportive of cash inflows include lower leverage at securities companies; the U.S. Fed nearing the end of its tightening cycle; and the imminent launch of the Korea Exchange (KRX) trading platform and a possible upgrade of the stock market classification.

In a baseline scenario for 2024, TPS forecast the VN-Index to hover around 1,387 points, equivalent to a growth rate of 10% for the whole year.

Meanwhile, in a more optimistic scenario, where global central banks loosen monetary policy, thus stimulating consumption and Vietnamese exports, the VN-Index may increase 15% to the 1,450 point territory.