Vietnam stocks have room to gain, investors told

VIETNAMESE stocks could be a good choice for Thai investors as they still have a lot of room for gains fostered by bright prospects for that country’s economy, a seminar heard.

“The price-to-earnings ratio is still low at about 13.6 times, compared with Thailand’s 19 times, meaning that we have upside gains [ahead],” said Hoang Viet Phuong, deputy managing director of Vietnam-based SSI Securities Services.

Speaking at a seminar on “Vietnam Market: The Tuning Point” held in Bangkok by Finansia Syrus Securities, Phuong told Thai investors that several sectors had recovered, such as retail sales and private consumption, while higher foreign direct investment (FDI) had driven a positive outlook. 

She said Vietnam’s gross domestic product was expected to grow by 6.5 per cent this year and by 6.7-7 per cent in 2016. Interest rates would stay low, as inflation is also low. And there were positive signs that the economy would continue the growth it has seen over the past three years.

Phuong said infrastructure development was a key driver of the country’s economic growth, attracting FDI would increase demands on transport infrastructure for the next three to five years. Reforms in banking to meet international standards were also discussed a lot this year.

In addition, she said the foreign ownership limits were likely to be extended, possibly to 100 per cent, to pave the way for more FDI for sectors not considered critical to government oversight. Currently, foreign ownership of Vietnamese companies is limited to 49 per cent for listed stocks, but to 30 per cent for banks. 

Moreover, she said Vietnamese exports were able to take advantage of various trade pacts, such as those with South Korea and the European Union, as well as being a member of the Asean Economic Community.

Vietnam has two stock exchanges. In Hanoi, 359 listed companies are trading with market capitalisation of US$6 billion (Bt210 billion), while in Ho Chi Minh City, 301 listed companies account for market cap of $50 billion. The financial sector was the best performer in the first half of this year, with a 40-per-cent increase in stock prices. With the government’s efforts towards privatisation of the country’s state-owned enterprises, Phuong said there would be new initial public offerings on both stock markets.

Between 2005 and the third quarter of 2014, IPOs by state-owned enterprises accounted for a total charter capital of 84.5 trillion dong (Bt136 billion), with market cap of 157.5 trillion dong. So far this year, new listings have accounted for a total market cap of 12-trillion dong.

Phuong said the banking sector, which has eight listed companies, was very aggressive in restructuring, though earnings were not positive in the first half of this year because of an increase in provision expenses in a bid to comply with international standards for higher capital adequacy ratios. 

She said SSI expected to see upsides for the sector next year, as most banks would show strong growth. “You can pick the good banks for investments,” she suggested.

“For the market outlook this year, we are bearish on commodity stocks and neutral on banks. We are bullish on remaining sectors,” she added.