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Economy improving, GDP growth to accelerate, fund says
Vietnam’s economic indicators are improving and growth is likely to accelerate in the second quarter, according to PXP Vietnam Asset Management.
Inflation slowed to a five-year low of 5.6 percent this month and the trade deficit narrowed 92 percent through May compared with the same period a year earlier, according to preliminary figures released this week by the General Statistics Office in Hanoi.
“Last year’s inflation and trade gap-related concerns have abated,” PXP Vietnam Chief Executive Kevin Snowball said in a note that described the May inflation figures as “relatively benign” and also forecast an improvement in second-quarter growth in gross domestic product.
The economy expanded 3.1 percent in the first quarter from a year earlier, the slowest growth rate on record. The government is targeting an expansion of 5 percent for the whole year.
Government stimulus spending has started to support demand in the economy, wrote Prakriti Sofat, a Singapore-based economist at HSBC Holdings Plc, on May 25.
For imports, “the worst falls are now behind us,” Sofat wrote in a note about May’s trade figures. “Although year-to-date imports of machinery and equipment were down 24 percent, in sequential terms, imports have risen since the beginning of the year.”
The probability that growth would accelerate in the second quarter “should ensure that any VN-Index pull-back is not too severe,” PXP Vietnam’s Snowball wrote in his note.
‘Overdue breather’
The Ho Chi Minh Stock Exchange’s VN-Index has surged 81 percent since closing at 235.5 on February 24, its lowest level since 2005. On Wednesday, the measure rose for a third straight day to 425.17, its highest close since October.
“Given a rally from the bottom in excess of 80 percent in a virtual straight line, raising the index’s historical price/earnings ratio close to 15 times in the process, we anticipate the taking of an overdue breather before too long,” Snowball wrote.
Foreign investors were net sellers of Vietnamese stocks in April, a contrast with the optimism of domestic investors, Prudential Asset Management (Singapore) Ltd. said this month in a note to investors in its Vietnam-focused fund. The VN-Index gained 15 percent in April.
“Any rise from here presents further opportunity to ease out of non-core positions with a view to rebalancing on weakness,” Snowball wrote in his note. “We are a little concerned about the quality of almost US$100 million worth of daily turnover in a market that only three months ago was struggling to generate a tenth of that.”
thanhnien, bloomberg
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