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Vietnam's stock market making a comeback
Vietnam's stock market may end the year among Asia's top performers, after a 20 per cent rebound so far. Relatively low valuations make Vietnam's stock market among the cheapest in the region while year-to-date returns have been handsome.
Vietnam's stock market may end the year among Asia's top performers, after a 20 per cent rebound so far.
Relatively low valuations make Vietnam's stock market among the cheapest in the region while year-to-date returns have been handsome.
Second only to Pakistan in stock market returns this year, analysts say Vietnam is winning back much of the confidence it had lost.
As a competitor for foreign money to neighbouring Myanmar, analysts say Vietnam may be due for a second wind.
Daryl Liew, head of portfolio management at Reyl Singapore, said: "Vietnam was a hot theme back in 2006, 2007, when a lot of people piled into the equity market and subsequently suffered huge losses there.
"So as a word of caution, possibly Myanmar could be similar. Not saying it will be the case but that's always the case when you have too much money chasing after too few opportunities. And given that Vietnam has corrected significantly already, so much so that there are entry points for people to get into the market."
Overshadowed on some levels by Myanmar, Vietnam is making a comeback of sorts.
The government's shift from pro-growth to pro-stability has eased inflation and improved the country's trade balance.
Edward Lee, head of Southeast Asia Research at Standard Chartered Bank, said: "If you look at the export performance of Vietnam this year, it's still running close to 20 per cent year-on-year so this is suggesting lots of investment going into Vietnam despite the current weakness in global growth.”
Although it may be slow, experts say Vietnam's economy is on the road to recovery. In this year alone, 80 per cent of the year's foreign direct investment went into the manufacturing sector.
But in order to boost investor confidence and accelerate that recovery, analysts say more financial reforms must be introduced to tackle Vietnam's high debt levels.
The Vietnamese government introduced the Vietnam Asset Management Company to provide more liquidity to the financial system, but it does not provide enough capital.
Alfred Chan, director of financial institutions of Fitch Ratings Singapore, said: “What the foreign investors would like to have is a controlling stake so it enables them to have a decision on how to run a bank. If they were to not have a controlling stake, they would be at the mercy of some of these minority interests.
"It's a question of what the government stance is in terms of national interest. At the same time, also be open to accepting foreign capital which I guess is a much-needed area for some of these banks given the problems they have on the asset side. So capital is important to help absorb some of the risk they are carrying on their balance sheet.”
Fitch currently rates Vietnam's credit profile as B+.
As for the QE tapering fear that has gripped many of its neighbours, Vietnam may just come out unscathed.
Standard Chartered Bank's Mr Lee said: "The portfolio flows stayed clear of Vietnam so when the reverse happens, I’d like to think that Vietnam will be spared from direct outflows."
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