Vietnam's stock index has fallen by more than 14% this year. Some U.S. portfolio managers have recently expressed that now is a "good time to consider investing in Vietnam."
Dragon Capital is a well-known investment company . The company recently decided to take out $7 billion in assets and focus on investing in the securities market in Vietnam. The company said that stock valuation is now cheap and is expected to grow by more than 20% in 2022.
Why did you decide to invest in Vietnam?
The company's Vietnam portfolio manager Thao Ngo said on June 5 that Vietnam's banking and retail industries look attractive. She said bank stocks have huge growth potential in the mass market sector, as more than half of Vietnam’s population currently has a “underserved” banking industry, and the earnings of retail stocks will recover strongly due to pent-up demand after the pandemic.
Ngo said in CNBC's "Squawk Box Asia" program: "Our investment strategy is to bring long-term growth to investors. We have always focused on three key themes for Vietnam: first of all, urbanization, the formation of the middle class and strong domestic consumption."
The current stage of Vietnam's economic and stock market development is similar to China 15-20 years ago, and it belongs to a high growth stage. The Vietnamese stock market is a representative of high ROE and low PB, with a high cost performance. Although developed countries such as the United States have very mature capital markets and excellent companies at the top of the industrial chain, the rapid development of Vietnam's economy is unique, and the profit growth of listed companies is faster. In the rapidly growing economy, it is more direct and convenient to share the economic growth dividends by investing in the stock market.
Why is Vietnam optimistic?
Dragon Capital's portfolio manager outlines multiple reasons why Vietnam stocks are a good choice.
Dragon Capital believes that the Southeast Asian economy has become one of the fastest growing economies in GDP in recent years, and this momentum is still continuing. In 2020, Vietnam's economic growth even exceeded that of China. Despite the global pandemic, Vietnam has not seen any quarterly economic contraction. The GDP report compiled by institutions such as
International Monetary Fund and other institutions shows that Vietnam performed better than all countries in Asia in 2020. Vietnam's GDP in 2020 was US$271.2 billion, a year-on-year increase of 2.91%, higher than China's 2.3% and Taiwan's 2.45%, while other regions in Asia recorded negative growth that year.
Ngo said that Vietnam's politics and macro policies are relatively stable, and the rapid growth of Vietnam's middle class has created a "strong platform" for the country to achieve 6%-7% GDP growth. She added: "This year, the Vietnamese government also set a target of 7% GDP growth, and they have achieved 5.03% in the first quarter."
The World Bank's representative office in Vietnam recently released the macroeconomic update report written by economists, which highly praised the achievements of the Vietnamese economy in the first quarter of this year. Economists at the World Bank evaluated that in the first quarter of this year, Vietnam's GDP comparable price increased by 5% year-on-year due to factors such as stable export growth, rapid recovery of manufacturing and gradual recovery of the service industry. This result is higher than that of other Southeast Asian countries and regions. Data released by the Thai government showed that the GDP in the first quarter of 2022 shrank by 1.8% year-on-year, while the economic growth in Indonesia and Malaysia in the first quarter was 5%.
IMF In the latest economic forecast , Vietnam's GDP in 2022 will reach about US$409 billion, a year-on-year increase of more than 6% (comparable prices), becoming one of the fastest economic growth countries in the world estimated by the IMF. At the same time, the IMF has also made some unexpected adjustments, significantly lowering China's DGP growth forecast for 2022 from 5.1% to 4.3%.
Although inflation is a big global problem in the United States and other countries. But Vietnam seems to have "controlled". In April, Vietnam's CPI increased by 2.64% year-on-year, and the average increase of 2.6% in the first four months of this year, both of which were the lowest year-on-year growth in the past five years. It is expected that the increase in CPI in Vietnam will be around 4-5% in 2022.
In terms of promoting post-epidemic economic recovery, Vietnam's monetary and fiscal policies are also highly appreciated by International Monetary Foundation . Francois Painchaud, chief representative of the International Monetary Fund (IMF) Office in Vietnam, commented that Vietnam has successfully maintained the stability of fiscal policy, foreign trade balance and financial stability. According to the International Monetary Fund's evaluation, when the COVID-19 outbreak, Vietnam had issued macroeconomic and fiscal policies to provide assistance to enterprises and families by reducing tax and fee costs, increasing recurring expenses and investment expenditures. National Bank maintains liquidity, lowers the basic interest rate, and requires banks to lower or exempt loan interest. At the same time, banks are allowed to reorganize their debts, but the original loan classification and provision must be maintained. In particular, the timely implementation of economic and social recovery and development plans by the Vietnamese government will help promote economic recovery, heal the "scars" caused by the epidemic, and promote sustainable and inclusive economic growth in Vietnam.
Can the Vietnamese securities market attract foreign investors?
In fact, in May, overseas investors netted more than 77 billion VD on the Vietnamese stock market.
Hanoi Stock Exchange (HNX) statistics show that in May, stock trading on HNX fell month-on-month. On the last trading day of May, the HNX index closed at 315.76 points, down 13.68% month-on-month. It can be seen that the stock market on HNX experienced strong fluctuations in the first five months of 2022. After the HNX index hit a historical high of 493.84 points on January 7, the HNX index fell to its lowest point since the beginning of the year on May 23. Compared with last month, market liquidity also declined in May. The total trading volume of stocks in the city reached 1.5 billion shares, with a turnover of more than 34.4 trillion VND. The average daily trading volume exceeded 79 million stocks, with a turnover of more than 1.723 trillion VND, with a decrease of 16% and 32% month-on-month respectively. At the end of May, the market value reached 363.5 trillion VND, a month-on-month decrease of 12%.
Overseas investors' trading volume decreased month-on-month in May. However, overseas investors bought more than 77.2 billion VND that month. Among them, the purchase amount exceeded VND362 billion and the sales amount reached VND284 billion.
Although the Vietnamese stock market has fallen this year, historically, the Vietnamese stock market outperformed 90% of the global stock index.
The rapid growth economy naturally contains a wave of wealth growth. Previously, Vietnam's new foreign investment bill was implemented to trigger a bull market, and Vietnam's Ho Chi Minh Index rose 70% in just two years from 2016 to 2017. In fact, the Vietnamese Ho Chi Minh Index rose nearly three times from around 400 points in 2012 to a high of more than 1,500 points.
It is worth mentioning that as the only fund in China that mainly invests in the Vietnamese market, Tianhong Vietnamese market stock QDII hit a 40% yield in 2021. As of April 27 this year, the yield in the past two years was as high as 72.73%. Such yields are relatively rare in the world securities market.
[Author: Xu Sanlang]
