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HSBC: foreign investors hard to ignore Vietnamese stock market for longer

Rosy Huong Rosy Huong

huongthhd@gmail.com

May 07, 2021 | 08:56

Vietnam is frontier equity market which has been interested in and liked, with its turnover now almost the same level as Singapore and far more than Malaysia and Indonesia, according a report by HSBC.

Vietnamese billionaires’ worth up by $500 mln as stock market scales new high Vietnamese billionaires’ worth up by $500 mln as stock market scales new high
Vietnam stock market paid attention internationally by surge of new investors with Vietnam stock market paid attention internationally by surge of new investors with "record" jumps
Rosy signs for domestic securities market Rosy signs for domestic securities market
Giao dịch chứng khoán tại sàn Yuanta ở quận 1, TP HCM vào tháng 3/2021. Ảnh: Quỳnh Trần.
Stock market transactions in District 1, Ho Chi Minh City, in March. Photo: VnExpress

The report said a record 113,000 new domestic trading accounts were opened last March, taking the total to 3.02 million.

Average trading value per session was estimated at US$725 million in April, much higher than $596 million in the previous month. One year ago, this figure just stopped at $130 million.

As a result, the Vietnam market turnover is now almost at the same levels as Singapore and far more than Malaysia and Indonesia.

The VN-Index is up 12.4 percent since the beginning of this year, outperforming all the major regional benchmarks, and it has breached the psychological barrier of 1,200 for the first time, a level it failed to reach during previous bull markets in 2007 and 2018.

The effective containment of COVID-19 has led to a strong rebound in economic growth, and domestic liquidity has fueled the rally, which is being driven by new retail investors, the report noted.

HSBC: foreign investors hard to ignore Vietnamese stock market for longer
The Vietnam market turnover is now almost at the same levels as Singapore and far more than Malaysia and Indonesia. Photo: fintel.vn

HSBC believes that it will be difficult for foreign investors to ignore Vietnam for much longer for several reasons.

Vietnam offers a favourable risk-reward opportunity in one of the most resilient growth economies, it explained, adding that the Vietnamese market is getting deeper, broader and more liquid.

Foreign ownership limits (FOLs) are a key issue for foreign investors but HSBC argued it’s not a deal-breaker. Of the 30 major companies that make up the VN30 Index, 24 still have room available for foreign investors.

Stocks that have reached their FOL can be bought by paying a foreign premium. As they generate strong earnings growth but trade at cheaper valuations than their Asian peers, the premium doesn’t look excessive. Furthermore, policy reforms underway, although slow, are positive for the market.

Photo: Financial Times
The effective containment of COVID-19 has led to a strong rebound in economic growth in Vietnam. Photo: Financial Times

Moreover, valuations are attractive – the VN-Index is trading at a 12m forward PE of 15.1x, a 5.3 percent discount to its five-year average, and a 12m forward PB of 2.5x, a drop of 2.9 percent, HSBC further explained.

The VN Index rose 4.1 percent in April and is up 12.4 percent since the beginning of this year, easily outperforming the global emerging markets (GEMs), Asia excluding Japan, and frontier market indices which have risen 5.6 percent, 5.5 percent and 6.6 percent, respectively.

This growth is being supported by both internal and external factors, including strong flows of foreign direct investment (FDI), improvements in the manufacturing segment, and increased consumption.

Be the end of March, the number of investors entering the Vietnamese market makes up 2.8 percent of the national population, the report said./.

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Rosy Huong