Investors watching the market's movements. (Photo: VNA) Small- and mid-cap stocks have recently risen quite strongly. But the questionis whether this is a sign showing investors are gradually shifting back to thelarge-cap group.
Dragon Capital believes that as the economy returns to normal growth of 6-7 percentin 2022, good quality large-cap stocks, which reflect macroeconomic growthdrivers, will return to the role as market leader.
Vietnam not only is one of the best growth markets globally in 2021 with a rateof 35.7 percent, but has also made significant progress in developing thedomestic stock market. The market has 63 companies with capitalisation of over 1billion USD. Daily liquidity regularly exceeded the new average of 1 billionUSD, higher than other emerging markets.
Besides, the number of new accounts opened in November has surpassed thetotal number in the whole of 2019.
As the market liquidity increased sharply in the first half of 2021, thetrading system of the Ho Chi Minh Stock Exchange (HoSE) was congested causingthe market to stall, however, the problem was completely resolved inAugust.
The exchange’s infrastructure will be fully upgraded when the Korean tradingsystem comes into operation in the second quarter of 2022. In addition, the T 0transactions will create a foundation for the liquidity to continue toincrease. Futures, options and other derivative products will also be issuedafter that.
Fundamentals show that 2022 continues to be a positive year, although themarket has recorded outstanding gains last year, Dragon Capital said.
With 72 percent of the population already injected with two doses of theCOVID-19 vaccine and a fiscal stimulus package, the economic recoveryprocess is only in the early stages. Dragon Capital expects a 22.6 percentincrease in overall market earning per share (EPS), while the 2022 price toearning ratio (P/E) is only 11.8. This is an attractive valuation compared tothe internal market and other markets in the region.
Dragon Capital assesses that 2021 was a challenging and difficult year for theeconomy and the new Government, but Vietnam has successfully overcome it.
The country has flexibly switched from a zero-COVID strategy to “adapting andliving with COVID”, and has successfully implemented the largest vaccinationcampaign in history in just seven months.
And although many business activities were halted in the third quarter of 2021,the economy quickly recovered and accelerated again in the fourth quarter, withgrowth of 5.2 percent over the same period of 2020, supporting the whole year'sgrowth to reach 2.59 percent, the report showed.
By the end of 2021, Vietnam hasn’t returned to its pre-pandemic state with a3.8 percent decline in retail sales, while foreign visitors to the country arestill limited. However, with all achievements in 2021, Dragon Capital believesit will be a solid foundation for a promising 2022.
It also believes that the contrasting monetary policies of the US and China,with one side tightening while the other is loosening measures to support theeconomy, will offset each other's influence.
Therefore, their impact on emerging markets like Vietnam will also decreasesignificantly. In case that inflation remains at a low level in 2022, which isbelow 3.5 percent, the State Bank of Vietnam (SBV) will have more room tocontinue supporting monetary measures, according to Dragon Capital.
Although the size of the economic stimulus package is not as large as expected,if implemented effectively, it will have significant positive impact on theeconomy, according to the report./.
VNA
