Vietnam seen as investment magnet as virus saps ageing Thailand
Vietnamese stocks are outshining their Thai counterparts due to Vietnam’s high potential for economic growth, prominent investor Niwes Hemvachiravarakorn said on Thursday.
Among emerging markets, Vietnam’s equities are the most attractive for investors seeking high returns in the next 10 to 20 years, he said during a seminar hosted by Kasikornbank yesterday.
The Thai stock market is mature so would not move up much, while Thailand’s economy had long passed its peak, he warned. An ageing society and no technological advantages have put the Thai economy on a slowing growth path, he added.
In contrast, Vietnam is on the path of high economic growth once experienced by South Korea, Taiwan, Malaysia and Thailand. The Vietnamese economy has continued to expand during the virus outbreak while Thailand has suffered a sharp economic contraction.
However, Vietnam’s stock market is currently underdeveloped since wealthy Vietnamese prefer to make money from doing business, including manufacturing products for export. And since a high proportion of Vietnamese are young, they do not have incentives to save money for retirement. As a result, share prices and the stock index do not increase much.
Investors, however, can enjoy annual dividend yields from Vietnam’s listed companies of as much as 10 per cent, he said.
He also forecast that Vietnamese stocks will perform very well over the next 10 to 20 years.
Among advanced markets, he pinpointed the US as the most attractive investment destination.
While Thailand would see little change among big and small businesses post-Covid-19, the US has seen market caps of tech companies overtake traditional large corporates such as energy firms, he said.
The Stock Exchange of Thailand (SET) Index’s 15-per-cent drop this year was reasonable while shares that had recently risen would retreat in the coming years, he predicted.
Niwes is optimistic, however, about the global economy and expects a V-shaped recovery in the post-virus era. This was because the downturn was caused by people not working during lockdown, rather than by underlying financial woes, he said. So, when people return to work, growth will resume.
Thiti Tantikulanan, executive chairman of Kasikorn Securities, was also pessimistic about Thai equities. There was a high chance the SET Index would slide from its current level of around 1350, he said. He also cited uncertainty over whether a virus vaccine would be available by the end of this this year, and cautioned that any vaccine may not be effective in protecting people from the disease.
A second wave of infections could send the SET Index to a new low, while a delayed or ineffective vaccine may hurt global Thai equities, he warned.
Thai banks will not pay interim dividends this year as the central bank wants them to retain capital levels. Meanwhile property developers have cut their residential unit prices as they struggle to get rid of mounting surplus stock. It will take time before share prices in the property sector rebound, he added.
Kasikorn Securities advises investors to hold cash and wait for share prices to fall, suggesting that investors buy gold as a hedge against stock market volatility. Kasikorn analysts, however, still prefer equities over bonds, arguing that equities yield higher returns.
