Three scenarios for Vietnam’s securities market exposed
By Quynh Nhu
August 22, 2018 | 03:00 PM GMT+7
Although the securities market has recovered recently, there still exist more risks than in 2017, according to analysts from Maybank Kim Eng Securities Limited.
Since the beginning of 2018, Vietnam stock indices have been fluctuating strongly. VN-Index increased continuously in the first quarter and broke the record of the market when surpassing 1,200 points.
However, this index fell by about 30 per cent to 900 points, making Vietnam one of the global stock markets losing the most. In mid-July, VN-Index recovered and is now close to 1,000 points.
Vietnam's stock market seems to have been hit hard by the "US-China trade war" which erupted in late June. VN-Index fell 3.8 per cent in the period from late June to early August, while regional markets such as Thailand, Malaysia, Indonesia and the Philippines (ASEAN-4) grew by an average of 7 per cent.
"Vietnamese investors have overreacted to the impacts of the trade war," commented Nguyen Thanh Lam, Head of analysis at Maybank Kim Eng Securities Limited at the seminar on the Stock market in the second half of 2018: Are Opportunities great enough? "Although the market has rebounded in recent weeks, it is risky for investment," he said.
However, bigger risks do not mean that there would be no investment opportunity. Considering the adjusted price to earning (PE) ratio of five large-cap stocks (including VinGroup, Vinhomes, Vinamilk, Vietcombank and PVGas), Vietnam's market is currently trading at 14.5x lower than the average 17x of the ASEAN-4.
Previously, when VN-Index reached the peak of 1,200 points, the PE of Vietnam’s stock market was at 21.7x, 20 per cent higher than those of the regional markets calculated on the whole market scale.
Three scenarios for Vietnam’s stock market in the last half of 2018. Source: MBKE
Based on market analysis, Maybank Kim Eng presented three scenarios for VN-Index in the last half of this year.
In the base-case scenario, VN-Index would likely reach 1,109 points if the US-China trade war ended without any additional tariffs on $200 billion worth of imports as declared.
In the worst-case scenario, the US and China trade war was impossible to stop, VN-Index would fall to 820 points.
In the best-case scenario, VN-Index is expected to reach 1,300 points at the end of this year.
Lam commented the domestic and foreign cash flows are quite tight, causing the market's dispersion. The profit rate of 15 per cent in nearly six months is not high. So, investors needed to choose the right stocks for investment.
Lam recommended that investors should eye on some sectors such as banking, consumer goods, building materials and real estate. Especially, the banking sector is expected to achieve an average after-tax profit of 20 per cent (listed banks).
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