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Investment in banking stocks to pay off when economy recovers
Banking stocks are a good choice for long-term investment since the sector will benefit when the economy recovers fully, Saigon Securities Inc has said in its latest sector-wise advisory.
Though the sector does face more challenges, opportunities are also increasing because demand for banking services will pick up along with economic recovery, it says.
"Lower credit growth in 2010 [25 per cent compared to 38 per cent in 2009] will be offset by widened interest margin thanks to more flexible deposit and lending rates.
"Earnings growth of the sector will be sustained as two key earnings drivers, interest income and fee income, will continue their momentum in 2010."
An analyst also explained that since banking is among the economy's most important sectors, it attracts foreign investors.
Many banks are also set to hit the market with share issues to expand their capital. But smaller and less profitable banks like HDBank, WesternBank, and DaiA Bank could face difficulty in finding buyers.
As a result, HDBank plans to price its issue at par. Even the large, HCM City Stock Exchange-listed Sacombank plans to sell at a mere VND5,000 premium.
The SSI report also recommends the manufacturing sector with a focus on exports, building materials, seafood, pharmaceuticals, and some property segments.
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