|
Foreigners continue to buy Vietnam stocks: JPMorgan executive
Foreign investors remained buyers on the Vietnamese stock market, David Fernandez, head of emerging markets research at JPMorgan Chase & Co., said in a television interview with Bloomberg in Singapore this week.
So, the worst is almost over?
David Fernandez: I think so.
I mean if you look at the data that have been coming out of Vietnam, they’ve deteriorated at an extremely rapid pace at the end of last year and that pace of deterioration accelerated into early this year; in particular, the inflation numbers as well as the fact that the trade deficit has ballooned in the first part of the year.
A lot of analysts have taken these numbers and extrapolated them out and said that Vietnam is headed for a crisis situation.
When we look at the numbers, we would say that what we see is that the maximum amount is likely close to a peak when it comes (in particular) to the trade deficit, which we think is probably going to narrow significantly in the second half of the year and that the inflation data are probably close to peaking as well.
They have to still look at the fuel prices but once that’s done, you could probably still end the year at closer to 20 percent than the current level of 25 percent.
But investors are not convinced — if you take a look at the benchmark, it continues to decline.
How much lower can it go? Where’s the bottom?
Well I think for the equities in Vietnam, I think everyone would agree that the past couple of years have been an extremely frothy time; valuations were at levels that were unreasonable and so it’s potentially still the case that as a broad market, they’re still paying on the equities side in Vietnam.
But having said that, I think that talking to our investors who continue to want to get exposure, and if you look at the foreign numbers, foreigners continue to be buyers.
These are buyers who are dedicated to Vietnam who are there for the long term.
This correction could indeed potentially continue, given, again, the froth, especially with domestics buying into the market when they really had no business doing.
So you could still have some negative effects in the equity market but foreigners I think will still want to keep buying it.
I would look at other asset prices as really an indicator as to whether or not indeed the worst is over.
Let’s talk about the dong. Is there concern the government will gradually devalue the dong to avoid a currency crisis?
Well, it’s actually much worse - the market has started a price crisis in that there would be an immediate and very sharp devaluation of the currency.
Several analysts have come out and said things need to happen and happen very quickly in terms of changing the value of the dong and devaluing it.
In meetings I had last week with the government, [officials] indicated there’s no plan whatsoever to do that.
Our analysis would agree that there’s really not only no pressure from a foreigner exit point of view on balance of payments for Vietnam to devalue the dong, but really there is no benefit for Vietnam from doing so.
And so our sense is that no, they will not be doing anything in terms of any change in the currency regime there.
What needs to be done for investor sentiment to return to Vietnam?
Well I think this is a several-stage game and I think it’s important to get the stages right.
People want to talk about the long list of things that Vietnam needs to do on a long-term basis – that’s fine, be it SOE (state-owned firm) reform, legal reform, other things that need to be done in order to sustain the long-term growth of Vietnam – but let’s get the stages right.
First thing is to make sure that markets understand there is no plan whatsoever to devalue the dong and, more importantly, that not only words are used to shore up its value but also action is taken.
Vietnam has run very large surpluses.
They need to intervene more aggressively and to show the market they’re serious.
Thanhnien
|
