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Stock market: difficulties now, but opportunities later
A series of statistics have been announced in the last week which show that the measures taken by the government to curb inflation have brought the desired effects. The figures have raised hopes about the recovery of the stock market in the near future.
Some changes in investors’ “taste”
‘Painful in the short term and profitable in the long term’ is what analysts think about stock investments in Vietnam.
Spencer White, strategic advisor to Thien Viet Securities Company, said that the current difficulties of the national economy, including high inflation, high risks for banks, and more expensive loans, will last for the next 12 months at least. As such, the stock market will not see a breakthrough in the short term.
However, Mr White believes that the market is sensitive to any economic indices and that it will see satisfactory happenings in the second half of the year, before the national economy recovers.
Spencer White, who was formerly Managing Director of Merrill Lynch, a specialist in newly emerging markets, also talked about changes in the taste of foreign investors. They have sold share items of companies which do not operate in key business fields, injected money in bonds, and made strategic investments in private companies. The investors have also been pushing up M&A activities, and eyeing the real estate market, in which projects are thirsty for capital consequent of the tightened monetary policies.
Mr While sees the petrol price hike, which is believed will make inflation worse, in a positive light. He said that it is necessary to raise the petrol prices, because subsidising petrol has been distorting the market, putting pressure on the state budget and worsening the current account balance. The state budget had to spend nearly $1bil in the first six months of the year to compensate importers for losses.
The sharp petrol price increase by 31% has caused a short-term psychological shock. However, in the long term, it will help producers calculate the real production costs of products. Enterprises would find it difficult to calculate the costs if the petrol price increased step by step and regularly.
Good potential in long term
Last year, foreign portfolio investment in Vietnam was $7.7bil, and the figure was $600mil in the first half of the year. Mr White said that investors should only purchase the securities they know well, and that there will be many opportunities for long-term investors.
The average P/E index of the market is now at 10-15. However, not only shares on Vietnam’s stock market are decreasing: securities prices in other countries have also become more attractive, including China.
He said that policymakers should resume the daily trading bands of 5% for the HCM City Stock Exchange and 10% for Hanoi Securities Trading Centre in order to improve the liquidity of the markets, and remove the limitation on foreign ownership ratio. Vietnam should also redefine its policies on selling stakes to foreign investors, to aim at supporting the long-term goals of enterprises rather than collecting as much money as possible for the state.
Mr While affirmed that the current difficulties of the national economy will not affect the long-term potentials of Vietnam. He believes that now is the right time to begin negotiations on trade deals.
VNN
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