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Vietnam equity: second to none amid global volatility

Apr 22. 2018
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By Asset Plus Fund Management
Special to The Nation 

2,100 Viewed

Global stock markets have been volatised through the first quarter of 2018. However, amid the fluctuations, there are always investment opportunities hidden amid the crisis and one of them is the Vietnamese stock market. 

While the global equity markets have fluctuated, the Vietnam equity market has continued to outperform. As we have seen, the VN30 index has risen more than 20 per cent from the beginning of this year, whereas the MSCI all Country World and MSCI Asia ex Japan indexes have plunged to –1.48 per cent and –0.20 per cent respectively, according to Bloomberg on April 6. Moreover, It has remarkably soared by six times compared to 2012, according to Bloomberg on November 27, 2017.

In addition to the charm of the outperformฌing return, the Vietnam stock market is also impressive in its future growth prospects. Investors are often familiar with the fact that the Vietnamese market is driven by large capital investments, especially in real estate, the banking sector and consumer products. In fact, Vietnam’s stock market also has a number of mid-small cap equity with great potential for growth. In the second half this year, we expect to see a return to the laggard in all three sectors, which are, especially, midsmall cap stocks with price to earnings lower than 10 times.

For the real estate sector, the outlook is still bright because the excess supply problem has returned to balanced. The industry is also reinforced by the purchasing power of the Vietnamese population. The price of real estate is relatively inexpensive compared to per capita income. In addition, 80 per cent of home purchases in Vietnam are cash buys, which helps reduce the concerns about a bubble in home loans and real estate. Meanwhile, real estate in Vietnam also benefits from the expansion of urban areas. The urbanisation has begun to expand to District 2, which is gaining interest among foreign investors. This also would have the tendency to attract more foreign investment.

The banking sector also has healthy growth. The private sector credit continues to expand. Similarly retail credit growth is likely to grow further due to the digital platform development and the wide access to online transactions of Vietnamese people. Moreover, investors are still eyeing the listing of Techcom Bank and TP Bank, which are expected to push the Vietnamese market bust up quite a lot in the second quarter.

For stocks in consumer products, the growth of Vietnam’s GDP per capita and the consumer confidence index have still reflected purchasing power and the potential to drive domestic consumption. 

The consumer goods sector, including household products, electronics and jewellery, is likely to show positive performance over the past few years and is expected to grow significantly in the future, 

Apart from these three sectors, Asset Plus Fund Management considers technologyrelated stocks. 

Products that will benefit from valueadded will gain more positive attention. These may include some technology stocks or tourism stocks that have not been listed yet on the Vietnamese stock market, but are likely to generate earnings growth in the near future. 

In addition, analysts also predict that earnฌings of listed companies in the Vietnamese stock market in 2018 will be approximately 19 per cent. That is the highest rate in Asia Pacific and among other Asean equity markets such as Malaysia, Indonesia and Singapore, which are projected to be only 10 per cent, 9 per cent and 6 per cent, respectively. This is also three times higher than the forecast of the profit companies listed on the Japanese stock exchanges, accordฌing to IBES Thomson Reuters.

For mutual fund investors with risk appetites and who are ready for longterm investment, investing in Vietnam Equity Funds provides another choice to gain high expected returns on the future economic potential and growth prospects of the Vietnamese stock market. It is also an opportunity for outstanding growth amid the volatility of global stock markets.

Contributed by Asset Plus Fund Management.

Investment entails risk. Investors should thoroughly study prospectuses, product features, return conditions and risk before investing.

 

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