Illustrative image (Source: VNA) Hanoi (VNS/VNA) - Thesecurities market is likely to be the most attractive investment channel forinvestors in the Vietnamese economy this year, analysts said.
They attribute this to theGovernment’s efforts to improve trading conditions, upcoming sales of large-capState-owned enterprises and undervalued shares.
The securities market haswitnessed strong growth since the beginning of 2017, surpassing analysts’expectations, and promises to break its old peak of 1,075 points made inNovember 2007.
The benchmark VN Index onthe HCM Stock Exchange has gained nearly 51 percent since the end of 2016 andthe minor HNX Index on the Hanoi Stock Exchange has grown 48.7 percent in thesame period.
Trading liquidity rose withan average value of 5 trillion VND (222.2 million USD) in each session, anincrease of 63 percent year-on-year; and market capitalisation increased to 155 billion USD, equal to 74.6 percent of the nation’s total gross domesticproduct (GDP), according to the State Securities Commission.
Foreign investors posted anet buy value of roughly 1.2 billion USD in stocks and 750 million USD in bonds, andraised the total value of invested assets to 31.4 billion USD, almost twice thefigure recorded in 2016.
The number of newly listedshares on the local markets increased by 30 percent from the beginning of theyear as a number of large-cap firms started trading their shares, like VPBank,brewer Sabeco and petrol dealer Petrolimex, providing high-quality stocks forinvestors.
According to banking andfinancial expert Can Van Luc, local markets are set for a 15-20 percent growththis year – higher than average rates in the region and the world.
Chairman of SaigonSecurities Inc, Nguyen Duy Hung, said that Vietnam’s macroeconomic factorswere expected to further improve in 2018, supporting further development of thesecurities market.
The economic outlookreports of some financial institutions like the Asian Development Bank, WorldBank and HSBD have predicted that the Vietnamese economy would advance thisyear with inflation and lending rates under control, accompanied by risingforeign reserves and foreign direct investment (FDI).
Furthermore, the Vietnameseeconomy is set to benefit from the recovery of neighbouring markets like Japanand China.
Hung said that expectedchanges in Government’s policies would also strongly boost the securitiessector in 2018.
He said the industry mustcomplete five tasks this year: the merger of the two local exchanges;introduction of new securities products; completion of the securities law; strengtheningthe Government bonds market; speed up equitisation of SOEs.
The securities market alsoexpects to draw more foreign investment as the Government tries to make privatesector the central factor in national socio-economic development and push moreSOEs to list shares on the local exchanges, he said.
‘Frontier to emerging’
These factors are widelyexpected to increase the number of high-quality stocks, raise the percentage offree-floating shares, increase trading liquidity and help raise the Vietnam’ssecurities market from “frontier” to “emerging” status, drawing more attentionfrom foreign investors.
According to the MiraeAsset Securities Company, there are plenty of opportunities with stocks thatare not among top 20 largest firms by market capitalisation as they areundervalued at present.
The company wrote in its2018 outlook report that the stock market performance thus far has been mainlydriven by the top 10 caps, which have contributed 210 points to theyield-to-date increase of the VN Index, accounting for 76 percent of theincrease.
Meanwhile, the top 10declining stocks only pulled the benchmark index down six points, or just 2.8 percentof the growth of the top 10 largest stocks.
“The rally of 2017 wasrelatively narrow, and most investors were likely not able to participate init. The broader market has underperformed the headline number, and thevaluations of most stocks are now lower compared to their historicalperformance,” it said.
Real estate caution
The property sector is typicallyone that draws a lot of investor attention, but there have been warnings of astrong imbalance between supply and demand, and unsustainable development ofthe industry.
According to NeilMacGregor, managing director of the foreign property service and consultancyfirm Savills Vietnam, foreign investors are very keen on participating in Vietnam’sproperty sector as the country’s GDP has increased impressively, rapid urbanizationis happening as is infrastructure development.
However, the propertymarket in fact was quiet in 2017 compared to the previous two years despitereal estate firms reporting high earnings for the 2015-2017 period.
MacGregor told local mediathat there was an increasingly large gap between supply and demand in theproperty market that could dampen the market’s absorption, especially inhigh-end segments like condotel, officetel and hometel.
“There will be a big changein the market structure in 2018 to diminish the surplus of current products,which will drive the market back to its healthy, sustainable development track,and the segments of cheap products will be boosted by strong demand from lowand middle-income buyers,” the HCM City Real Estate Association (HoREA) said ina November report.
Secondary investors shouldbe careful with property projects that promise a premium of 8-12 percent eachyear for the next 8-12 years, as there was no protection for investors in suchprojects, HoREA added.
Gold, foreign currencies toslow
Among other investmentchannels, gold and foreign currencies are forecast to slow down in 2018 asinvestors may be worried about market volatility and the Government’s effortsto minimise their impacts on economic development.
Nguyen Duc Hung Linh, headof market analysis and investment advisory at SSI, said that the gold marketthis year would be quite volatile on global political and economic changes.Also, domestic gold prices do not move in tandem with global changes, he said.
Global gold prices havemoved up 12 percent on average since January 1, 2017, Bloomberg data shows.Meanwhile, the price chart of Bao Tin Minh Chau Gold Jewellery Companyindicates that domestic gold prices have moved down nearly 0.5 percent.
Financial-bankingspecialist Nguyen Tri Hieu said that the domestic gold market has remained asglobal market volatility was not strong enough to push local gold pricesstrongly, and there were other investment channels that drew investors’attention away from gold.
The stability was alsocaused by the Government’s efforts to reduce speculation on and collection ofgold products as well as the policies to stabilise the macro-economy, inflation and foreign exchange rates, Hieu added.
He said that these moves bythe Government have made Vietnamese people and investors see that gold is notthe only safe haven, thus reducing demand for the yellow metal.
Demand for gold in thedomestic market could decline further, with the State Bank of Vietnam (SBV)collecting feedback on a decree on gold trading that would give the centralbank a monopoly on accepting gold deposits. The new decree will replace Decree24/2012/NĐ-CP and get rid of certain conditions for companies that make goldjewellery.
Hieu said that if thedecree is passed, the current stability of domestic gold market would bestrengthened. If gold and jewellery products were traded freely, it wouldcause speculation and volatility in the domestic market, he added.
He also said that therewould be much volatility in global markets as demand for gold as a safe assetalways rises when there are tense political and economic events, as in theMiddle East and the Korean peninsula, and Britain leaving the European Union.
Meanwhile, the foreigncurrency market is also expected to remain calm in 2018, thanks to the stableexchange rate between the Vietnamese dong and the US dollar.
The reference exchange ratebetween the two currencies set by the SBV has changed little in the past oneyear, closing January 3 at 22,405 VND per dollar, compared to 22,425 VND at thebeginning of 2017.
According to economist Vo Tri Thanh, the pressure on exchange rate may not be too hard in 2018 if Vietnam is able to maintain its trade surplus and keep inflation around 4 percent,thus raising foreign reserves to reduce the dependence on foreign currencies.
The Vietcombank SecuritiesCompany (VCBS) has forecast that the exchange rate between the Vietnamese dong and thedollar would fall by less than 3 percent this year, thanks to abundant supplyof foreign currencies through direct and indirect foreign capital flows intothe sales of SOE shares and the development of special economic zones.-VNA
They attribute this to theGovernment’s efforts to improve trading conditions, upcoming sales of large-capState-owned enterprises and undervalued shares.
The securities market haswitnessed strong growth since the beginning of 2017, surpassing analysts’expectations, and promises to break its old peak of 1,075 points made inNovember 2007.
The benchmark VN Index onthe HCM Stock Exchange has gained nearly 51 percent since the end of 2016 andthe minor HNX Index on the Hanoi Stock Exchange has grown 48.7 percent in thesame period.
Trading liquidity rose withan average value of 5 trillion VND (222.2 million USD) in each session, anincrease of 63 percent year-on-year; and market capitalisation increased to 155 billion USD, equal to 74.6 percent of the nation’s total gross domesticproduct (GDP), according to the State Securities Commission.
Foreign investors posted anet buy value of roughly 1.2 billion USD in stocks and 750 million USD in bonds, andraised the total value of invested assets to 31.4 billion USD, almost twice thefigure recorded in 2016.
The number of newly listedshares on the local markets increased by 30 percent from the beginning of theyear as a number of large-cap firms started trading their shares, like VPBank,brewer Sabeco and petrol dealer Petrolimex, providing high-quality stocks forinvestors.
According to banking andfinancial expert Can Van Luc, local markets are set for a 15-20 percent growththis year – higher than average rates in the region and the world.
Chairman of SaigonSecurities Inc, Nguyen Duy Hung, said that Vietnam’s macroeconomic factorswere expected to further improve in 2018, supporting further development of thesecurities market.
The economic outlookreports of some financial institutions like the Asian Development Bank, WorldBank and HSBD have predicted that the Vietnamese economy would advance thisyear with inflation and lending rates under control, accompanied by risingforeign reserves and foreign direct investment (FDI).
Furthermore, the Vietnameseeconomy is set to benefit from the recovery of neighbouring markets like Japanand China.
Hung said that expectedchanges in Government’s policies would also strongly boost the securitiessector in 2018.
He said the industry mustcomplete five tasks this year: the merger of the two local exchanges;introduction of new securities products; completion of the securities law; strengtheningthe Government bonds market; speed up equitisation of SOEs.
The securities market alsoexpects to draw more foreign investment as the Government tries to make privatesector the central factor in national socio-economic development and push moreSOEs to list shares on the local exchanges, he said.
‘Frontier to emerging’
These factors are widelyexpected to increase the number of high-quality stocks, raise the percentage offree-floating shares, increase trading liquidity and help raise the Vietnam’ssecurities market from “frontier” to “emerging” status, drawing more attentionfrom foreign investors.
According to the MiraeAsset Securities Company, there are plenty of opportunities with stocks thatare not among top 20 largest firms by market capitalisation as they areundervalued at present.
The company wrote in its2018 outlook report that the stock market performance thus far has been mainlydriven by the top 10 caps, which have contributed 210 points to theyield-to-date increase of the VN Index, accounting for 76 percent of theincrease.
Meanwhile, the top 10declining stocks only pulled the benchmark index down six points, or just 2.8 percentof the growth of the top 10 largest stocks.
“The rally of 2017 wasrelatively narrow, and most investors were likely not able to participate init. The broader market has underperformed the headline number, and thevaluations of most stocks are now lower compared to their historicalperformance,” it said.
Real estate caution
The property sector is typicallyone that draws a lot of investor attention, but there have been warnings of astrong imbalance between supply and demand, and unsustainable development ofthe industry.
According to NeilMacGregor, managing director of the foreign property service and consultancyfirm Savills Vietnam, foreign investors are very keen on participating in Vietnam’sproperty sector as the country’s GDP has increased impressively, rapid urbanizationis happening as is infrastructure development.
However, the propertymarket in fact was quiet in 2017 compared to the previous two years despitereal estate firms reporting high earnings for the 2015-2017 period.
MacGregor told local mediathat there was an increasingly large gap between supply and demand in theproperty market that could dampen the market’s absorption, especially inhigh-end segments like condotel, officetel and hometel.
“There will be a big changein the market structure in 2018 to diminish the surplus of current products,which will drive the market back to its healthy, sustainable development track,and the segments of cheap products will be boosted by strong demand from lowand middle-income buyers,” the HCM City Real Estate Association (HoREA) said ina November report.
Secondary investors shouldbe careful with property projects that promise a premium of 8-12 percent eachyear for the next 8-12 years, as there was no protection for investors in suchprojects, HoREA added.
Gold, foreign currencies toslow
Among other investmentchannels, gold and foreign currencies are forecast to slow down in 2018 asinvestors may be worried about market volatility and the Government’s effortsto minimise their impacts on economic development.
Nguyen Duc Hung Linh, headof market analysis and investment advisory at SSI, said that the gold marketthis year would be quite volatile on global political and economic changes.Also, domestic gold prices do not move in tandem with global changes, he said.
Global gold prices havemoved up 12 percent on average since January 1, 2017, Bloomberg data shows.Meanwhile, the price chart of Bao Tin Minh Chau Gold Jewellery Companyindicates that domestic gold prices have moved down nearly 0.5 percent.
Financial-bankingspecialist Nguyen Tri Hieu said that the domestic gold market has remained asglobal market volatility was not strong enough to push local gold pricesstrongly, and there were other investment channels that drew investors’attention away from gold.
The stability was alsocaused by the Government’s efforts to reduce speculation on and collection ofgold products as well as the policies to stabilise the macro-economy, inflation and foreign exchange rates, Hieu added.
He said that these moves bythe Government have made Vietnamese people and investors see that gold is notthe only safe haven, thus reducing demand for the yellow metal.
Demand for gold in thedomestic market could decline further, with the State Bank of Vietnam (SBV)collecting feedback on a decree on gold trading that would give the centralbank a monopoly on accepting gold deposits. The new decree will replace Decree24/2012/NĐ-CP and get rid of certain conditions for companies that make goldjewellery.
Hieu said that if thedecree is passed, the current stability of domestic gold market would bestrengthened. If gold and jewellery products were traded freely, it wouldcause speculation and volatility in the domestic market, he added.
He also said that therewould be much volatility in global markets as demand for gold as a safe assetalways rises when there are tense political and economic events, as in theMiddle East and the Korean peninsula, and Britain leaving the European Union.
Meanwhile, the foreigncurrency market is also expected to remain calm in 2018, thanks to the stableexchange rate between the Vietnamese dong and the US dollar.
The reference exchange ratebetween the two currencies set by the SBV has changed little in the past oneyear, closing January 3 at 22,405 VND per dollar, compared to 22,425 VND at thebeginning of 2017.
According to economist Vo Tri Thanh, the pressure on exchange rate may not be too hard in 2018 if Vietnam is able to maintain its trade surplus and keep inflation around 4 percent,thus raising foreign reserves to reduce the dependence on foreign currencies.
The Vietcombank SecuritiesCompany (VCBS) has forecast that the exchange rate between the Vietnamese dong and thedollar would fall by less than 3 percent this year, thanks to abundant supplyof foreign currencies through direct and indirect foreign capital flows intothe sales of SOE shares and the development of special economic zones.-VNA
VNA
