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Previous article We introduced the basic situation of Vietnam and the macro level of the Vietnamese market. In this article, we mainly introduce the basic situation and investment logic of Vietnam stock market, as well as the core strategies of managers.
Basic Situation of Vietnam's stock market
There are two stock exchanges in Vietnam, namely the Ho Chi Minh City Exchange (HOSE) and the Hanoi Exchange (HNX), which are located in Ho Chi Minh City and Hanoi City respectively. The stocks listed on the Ho Chi Minh City Exchange are mainly large blue chip , while the Hanoi Exchange is mainly small and medium-sized enterprise stocks. In addition, Hanoi Exchange's products include government bonds and derivatives.
As of January 2022, the Ho Chi Minh City Exchange owns 406 listed companies with a total market value of US$253.2 billion. There are 339 listed companies on the main board of Hanoi Exchange, with a total market value of US$17.4 billion. In addition, the Hanoi Exchange also has a UPCoM (i.e. "Unlisted Public Company") market to provide financing services for unlisted small and medium-sized enterprises and lay the foundation for future transfers to motherboard market .
Figure: Basic situation of Vietnam stock market
Source: HSBC, Bloomberg
Vietnam stock market trading system
Vietnam stock market regulatory agency is the Vietnam National Securities Commission (SSC) under the Ministry of Finance of Vietnam. This department is responsible for the development of the capital market, issuing market participation licenses, formulating and implementing relevant regulations. Vietnam stock trading hours are Monday to Friday (except on statutory holidays) from 9:00 to 11:30 am and 13:00 to 15:00 pm. The stock price limits of the Ho Chi Minh City Exchange and Hanoi Exchange are +/-7% and +/-10% of the opening price on the day, respectively. The price limits of the first trading day after are +/-20% and +/-30% of the opening price on the first day of listing or 225 days after html hangup html are +/-20% and +/-30% of the opening price respectively. Stock delivery implements a T+2 system. Vietnam restricts the foreign shareholding ratio of listed companies to 49%, while the foreign shareholding ratio of banks and other industries is 30%.
Vietnam market performance
Ho Chi Minh City Exchange Index (VN-Index) is the flagship index with the highest attention in the Vietnam stock market. This index is the weighted average of the market value of listed stocks on the Ho Chi Minh City Exchange. Since the bottoming out on March 24, 2020, VN-Index has continued to rise, with the cumulative increase of as of June 10, 2022 reaching 92.63%.
Since the beginning of this year, VN-Index has fallen by 14.3% due to the overseas situation, the Federal Reserve's interest rate hike balance sheet reduction and strong supervision in the Vietnamese securities market. The market has recovered since mid-May, and from May 17 to June 10, VN-Index has increased by 9.57%. VN-Index has a forward-looking price-to-earnings ratio of 13.9 times, and its valuation level is in the historical quantile of 6% in the past five years.
Figure: VN-Index trend
Data source: Wind, the statistical range is 20170611-20220610
Figure: VN-Index valuation level
Number According to source: Wind, the statistical range is 20170701-20220101
market classification
Among the world's largest index companies, MSCI currently classifies the Vietnam market as "frontier market" (Frontier) (Frontier) market) ; FTSE Russell currently classifies the Vietnam market as "frontier market" , and has been included in the observation list of potential upgrades to "secondary emerging market" (Secondary Emerging Market) since September 2018. In March this year, FTSE Russell announced that it would maintain the position of the Vietnamese market as the "frontier market" of .
Figure: MSCI Market Classification
Vietnam market trading volume
After 2018, the Vietnamese stock market has experienced a round of decline and rise as a whole. Although the overall increase is not large, the liquidity of the Vietnamese stock market has undergone changes. As of the end of 2020, the daily trading volume has been more than three times that of before the epidemic. The improvement in liquidity will change the discount in Vietnam that has previously existed due to insufficient liquidity. The number of account openings of Vietnam stock accounts is also increasing.
Data source: Wind, statistical interval is 20200429-20220429
Data source: Ho Chi Minh Exchange, statistical interval is 2020.01-2022.04
Investment logic of Vietnam market
In the medium term, from a time dimension of about 5 years, the main line of investment logic in Vietnam market is still the increase in urbanization rate. In the previous article, we mentioned that Vietnam's urbanization rate in 2020 was around 37%. According to the Vietnamese government's plan, the goal is to reach a level of nearly 50% by 2025. In fact, this stage corresponds to China from about 2000 to 2010. Looking back at that time in China, the significant investment logic and main line of the domestic capital market are actually investment opportunities brought about by the rapid increase in urbanization rates. Therefore, the weight of the VN30 index is mainly distributed in some industries related to urbanization improvement, such as banks, infrastructure, real estate, etc. If we look at it in the long run, Vietnam's relatively large population base actually brings more room for imagination to long-term investment.
Figure: VN30 index weight distribution
Data source: Ho Chi Minh Exchange, as of April 1, 2022
Risks of investing in the Vietnamese market
Investing in the Vietnamese market will still face some risks. If we look at the trend of VN-Index, there have been many rapid and large drawdowns in the past. The transmission path is first of all, external events lead to market retracement, and then it will touch the financing closing position, and financing closing will form a spiral or accelerated decline.
Currently, the average daily trading volume of the Vietnamese market is about US$1 billion to US$1.5 billion, and the scale of the financing market is about 6-8 times the average daily trading volume. The number of newly opened personal accounts in the Vietnamese market in the past two years is about 3 million, and a large number of newly entered individual investors do not have mature experience, so when facing a rapid retracement, their risk tolerance is often poor. In extreme market conditions, individual investor behavior will amplify the overall fluctuations of the market. In this process, trading volume will slowly shrink, and the market will re-enter a fundamental investment logic.
Core strategy: Global historical rise and fall investment system
Investment in the Vietnam market is actually an investment strategy based on national rotation, that is, investing in national β. Based on the macro investment trend of value and growth, managers insist on combining top-down macro analysis and bottom-up value investment:
- Based on the analysis of the global historical rise and fall system, based on the judgment of the general trend, strategically select countries where economic fundamentals begin to rise;
- analyzes the macroeconomics of the selected country, judges the industries that lead and benefit in the process of economic rise, analyzes the comprehensive factors that drive the rise of the capital market, and chooses the timing of strategic position building;
- combines bottom-up fundamental research and valuation analysis to select companies with excellent fundamentals in each industry to build an investment portfolio.
For 年年年年 , after 12 years of global investment exploration and practice, we have now tracked and studied multiple countries in depth, and accumulated a target country pool with investment opportunities in the future, including more than 30 countries/regions (more than a dozen core countries/countries), so that tranquilizes the ability to capture investment opportunities and rotate in different countries at different times.
Source: Child Heart Asia Capital Co., Ltd.
Summary, Vietnam stock market is a capital market worthy of attention. The rise of Vietnam's manufacturing industry has promoted the rapid development of the country's economy. Global multinational enterprises have concentrated in Vietnam to invest and build factories, which has led to rapid growth in Vietnam's GDP, trade surplus and national income. However, due to the low national income in the past, the stock market valuation was relatively cheap. With the rapid rise of the economy and the rapid increase in national income, the Vietnamese stock market ushered in a bull market with high certainty. The Vietnamese economy and stock market are experiencing the stage of China from 2001 to 2008. The logic is relatively similar, which can be called "dimensionality reduction investment", and is a market that domestic investors can easily understand.
Important statement
The information or the views expressed in this article do not constitute investment advice to anyone, nor do they take into account the recipient's special investment goals, financial situation or needs, and should not be used as the basis for investment decisions. The data and information contained in this article are derived from market public information or other sources that the Company considers to be trustworthy, but the Company does not make express or implied representations or warranties regarding its accuracy or completeness. The third-party reports or information, information, etc. reprinted in this article only represent the views of the third party and does not represent the position of our company. The Company does not guarantee that the views or statements in this article will not change. At different periods, the Company may issue reports that are inconsistent with the information, opinions and speculations contained in this article. The expected interest rate is a display of the general return range of such assets from a macro level. It is not the expected rate of return and does not represent whether any specific product is profitable and profitable. Investing is risky. The Company does not guarantee that investors will make certain profits, nor does it guarantee that the minimum return or principal will not be lost. Investors should fully consider their risk tolerance and risk identification capabilities and invest with caution.
