Vietnamese stocks 'good to buy now'

Vietnam’s benchmark VN-Index has dropped by almost 30% so far this year but its stocks, with cheap valuations, remain attractive, according to foreign and domestic investment firms.

“Vietnam’s robust economic growth, primarily driven by domestic demand, coupled with the government’s prudent economic policies, make Vietnam somewhat of an economic safe haven within emerging markets,” VinaCapital chief economist Michael Kokalari wrote in an October note.

He added, “In our view, the current market turmoil offers investors an attractive opportunity to buy Vietnamese stocks based on growth and price, given their current cheap valuations of 11x forward price to earning (P/E) versus 15% expected earnings per share growth in 2022, making them especially attractive compared to the average 15x forward P/E ratio of the regional peers - Indonesia, Malaysia, Thailand, and the Philippines.”

Foreign investment companies like Coeli Asset Management SA are looking to increase their positions in the country by buying the dips.

Coeli Asset fund manager James Bannan told foreign media: “There are a lot of high quality companies with fantastic structural growth opportunities trading over a standard deviation below their historical averages. It’s a great time to buy.”

Vietnam has just enjoyed one of the fastest periods of economic development in world history. Its economic growth of 8.83% year-on-year in the first nine months was the highest recorded in 12 years. The figure for the same period in 2021 and 2020 - both pandemic years, was 1.42% and 2.12%, respectively. The economy expanded 2.58% last year.

This fast economic growth amidst global uncertainties was touted at VinaCapital’s 2022 investor conference on October 5-7 as Vietnam’s primary attraction.

“It’s been three years since we were last able to host an in-person investor conference, and as we all know, the world has changed greatly since then. But one thing that hasn’t changed is Vietnam’s attractiveness for investment,” said Don Lam, CEO and founding partner of VinaCapital, one of Vietnam’s leading investment management companies.

VinaCapital chief investment officer Andy Ho said many listed companies in Vietnam as well as private enterprises in the market were operating effectively thanks to the market’s strong post-pandemic recovery.

“The companies we invest in, particularly those in the consumer discretionary sector, are generating solid earnings, some well-above pre-Covid levels, and with the continued strength of the economy, we are confident these companies are well-positioned to continue to grow and generate solid returns for our investors in the long term,” he said.

Nguyen Dieu Phuong, in charge of private equity investment at VinaCapital, said her group had recently received many inquiries on this type of investment in Vietnam, with healthcare, education, and retail getting more interest. “We already have about $250 million private equity flows in the pipeline for potential projects in Vietnam,” she said.

Foreign investors spent Friday more than VND1,250 billion ($51.8 million) on purchases while selling shares worth VND1,040 billion (over $43 million), marking their sixth net-buying session amid market downturn.

Stock markets around the world have been negatively affected by the recent global recession and uncertainties, as well as the U.S. Federal Reserve’s tighter monetary policy. The State Bank of Vietnam raised its key policy rates by one percentage point last month, effective on September 23. Investors began selling out of Vietnamese stocks.

VinaCapital securities investment head Nguyen Hoai Thu said at her company’s 2022 investor conference that Vietnamese stocks were still cheaply valued compared with those in other markets.

Rosy growth forecasts

Singapore’s United Overseas Bank (UOB) on October 5 revised its 2022 growth forecast for Vietnam to 8.2% from the previous 7%, following the country’s nine-month economic expansion of 8.8% from a year earlier. The nation’s 13.7% GDP growth in the third quarter has provided a strong foundation for the first nine months, laying the ground for strong performance in 2022, UOB Vietnam said.

Standard Chartered Bank on October 12 raised its Vietnam GDP growth prediction for this year to 7.5% from the previous 6.7%, and to 7.2% for next year from 7%, following robust Q3 growth.

The International Monetary Fund has also upped its Vietnam 2022 growth estimation to 7%, saying the country was poised to be Asia’s fastest-growing economy this year. Similarly, the World Bank said late this September that Vietnam's economic expansion can hit 7.2% this year and 6.7% next year, the highest in Southeast Asia.

The Vietnamese economy had been hit by the Covid-19 pandemic since early 2020, but the nation fully re-opened its borders in mid-March this year. It has continued to serve as a new production hub for many major multinationals, including global giants like Samsung, Apple, Intel, and LG, as well as various Japanese corporations. Danish toymaker Lego is investing more than $1 billion in building its latest production site on 44 hectares in the southern province of Binh Duong.

At present, Danish companies are rushing to make their presence felt in Vietnam, a new manufacturing hub. A delegation of more than 30 major Danish companies will accompany Crown Prince Frederik and Crown Princess Mary on their November visit to Vietnam, also to mark 50 years since the two countries established diplomatic relations.

Danish power giant Orsted expects to generate two gigawatts as its initial offshore wind power facility in Vietnam before 2030, spending $5.5 billion and creating 25,000 jobs, Orsted’s country manager in Vietnam, Sebastian Hald Buhl, told a business dialogue chaired by Prime Minister Pham Minh Chinh in Hanoi on September 18.