As the global stock market rise slowed, the Vietnamese stock index has accelerated in the past month, almost becoming the biggest dark horse - until it fell sharply on Tuesday.
htmlOn 19, the Vietnamese benchmark stock index Ho Chi Minh index (VN INDEX) experienced an epic collapse with an intraday decline of more than 6%, nearly smearing all the gains in last year, and nearly a quarter of Vietnamese stocks all hit the limit.Many investors who have not dared to get on the bus at a high level have raised the question: Can the Vietnam stock market " buy at the bottom"?
In this regard, JPMorgan Chase clearly held an optimistic attitude in its research report on Wednesday, believing that the Vietnamese market will rebound soon.
The bank said that this sharp pullback was driven by short-term profit-taking among local investors, contrary to the improvement of Vietnam's economic fundamentals. It is expected that with the economy exceeding expectations and the stock market implementing key reforms, the Vietnamese stock index is expected to reach the 1400 point high by the end of 5, which is higher than the closing on Wednesday at 23% .
Based on the following four key factors, JPMorgan Chase believes that the Vietnamese stock market will continue to rise:
1. Low interest rates support stock valuation and liquidity
Since this year, the Vietnamese government's continuous increase in economic revitalization measures and loose monetary policy have become one of the factors that the Vietnamese stock market has risen.
Under loose conditions, Vietnamese retail investors have entered the market at a low level, which has brought huge incremental funds to the market. In 2020, 2.8 million new trading accounts in the Vietnamese market were added, an increase of 17% over 2019, with individual investors being the main force in growth.
Moreover, with the ever-declining interest rates, bank deposits have become less attractive, and the "cheap funds" of banks inevitably flow to the capital market.
According to JP Morgan , Vietnam National Bank reiterated its goal of keeping interest rates low in 2021 and urged banks to further pass interest rate cuts to borrowers.
2. Active economic data and economic support policies, coupled with vaccine promotion, add support to the strong market recovery
Economic data, the official data disclosed by Vietnam shows that the country's GDP growth accelerated to 4.5% in the fourth quarter of last year, and the growth rate in 2020 reached 2.9%. The economic fundamentals are on a track of continuous recovery. As Vietnam continues to maintain its low interest rate target, JPMorgan expects Vietnam's real GDP growth to reach 8.3% in 2021.
At the same time, the fiscal deficit accounted for 4% of GDP last year. JPMorgan said that the budget balance is better than expected, and such a budget performance provides room for further stimulating the economy if necessary.
In addition, the further integration of regional supply chains and the impressive prospects of the technology industry and North Asia supply chains may further boost Vietnam's exports and manufacturing output.
: According to industry perspective, JPMorgan Chase believes that companies in the banking, IT, real estate and consumer discretionary industries will greatly benefit from economic improvement and structural growth.
3. Strong foreign capital inflows
JP Morgan noted that although local investors in Vietnam have stimulated liquidity and pushed up the market, foreign capital has been showing a net outflow trend over the past few months.
The bank believes that there is a strong driving force that reverses this trend in 2021, such as the lower risk premium of , the weak US dollar, potential growth above actual growth, and the current lower holdings of foreign capital in Vietnam.
In addition, the increasing weight of the frontier market in the MSCI index and the possibility of being reclassified as emerging markets after the stock market reform will also drive more foreign capital to flow into the Vietnamese market.
4. The more attractive valuation level compared to the main ASEAN markets
JP Morgan expects that Vietnamese stock market will record a 15-fold price-to-earnings ratio in 2021, between Malaysia and Singapore stock index.
To invest in the Vietnamese market, purchasing funds is a relatively convenient way. The net value of Tianhong Vietnam Stocks (QDII) funds has increased by 17% in the past three months, exceeding the Shanghai and Shenzhen 300 Index by 3 percentage points.
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