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

HSBC: Foreign Investors Hard to Ignore Vietnam’s Stock Market for Longer
Photo: Financial Times
Rise and shine. This report aims to be a one-stop shop for investors interested in Vietnam, a frontier equity market we have liked for some time. We are not the only ones. A record 113,000 new domestic trading accounts were opened in March 2021, taking the total to 3.02m. As a result, turnover rose to USD725m in April from USD596m a month earlier - a year ago it was only USD130m. 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% y-t-d, 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.
Strong growth rebound. The effective containment of COVID-19 has led to a strong rebound in economic growth and domestic liquidity has fuelled the rally, which is being driven by new retail investors. While this increases the risk of volatility, we do not see a risk of a major correction - with deposit rates in decline and gold prices under pressure, there aren't many alternative destinations for all this liquidity. And the outlook for stocks is bright - the economic recovery was confirmed by strong corporate results in 1Q21, with revenue rising 24.8% y-o-y and net profit 51.8% y-o-y.
Only a matter of time. HSBC believes that it will be difficult for foreign investors to ignore Vietnam for much longer as: 1) it offers a favourable risk-reward opportunity in one of the most resilient growth economies, 2) the market is getting deeper, broader and more liquid; 3) Foreign ownership limits (FOLs) - are a key issue for foreign investors but HSBC argues it's not a deal-breaker. 
Of the 30 major companies that comprise the VN30 Index, 24 have room available for foreign investors. 4) 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 see Asia Frontier Insights - The Vietnam equity market - increasingly investable 18 Mar 2021 and 5) valuations are attractive - the VN-Index is trading at a 12m forward PE of 15.1x, a 5.3% discount to its five-year average, and a 12m forward PB of 2.5x, a discount of 2.9%.

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