Foreign investors are cashing in on Vietnamese equities on the back of the country’s forecasted positive economic growth. Foreign investors have in 2010 bought more than 114 million Vietnamese shares and sold 94 million local shares, becoming the net buyers of more than 20 million shares, according to Ho Chi Minh Stock Exchange (HoSE) statistics.
In January alone, foreign investors bought around 20 million Vietnamese shares, HoSE said. Dominic Scriven, Chief Executive Officer of Dragon Capital, a leading foreign investment management company in Vietnam, said foreign investors’ heavy net buying was understandable as 2010 would be a time for economic growth after a positive recovery in 2009.
Vietnam’s economy grew 5.32 percent on-year in 2009, one of the few economies to enjoy positive numbers. In 2010, Vietnam is targeting 6.5 percent economic growth. “Cash holding is not the best option this year,” said Scriven, adding that banking, foodstuff, medicine, housing construction and export sectors would be his top priorities in 2010.
Ngo Quang Trung, Vietcombank Securities’ Director, said when the global and domestic economic picture became clearer foreign portfolio investment capital would find Vietnam. “Foreign capital will not be a driving market force, but certainly a factor for domestic investors,” said Trung.
Vietnam Securities Depository in January granted trading codes to 64 foreign institutional investors and 1,289 foreign retail ones, bringing the total of foreign investors having trading codes in Vietnam to 13,728, of which 1,213 were institutional. Numerous foreign investors are trading Vietnamese stocks without using trading codes as they trade via investment banks.
Total market capitalisation of Vietnam’s HoSE, Hanoi Stock Exchange (HNX) and UPCOM markets was estimated at VND651 trillion ($35.2 billion), which is relatively small in comparison with big global players. “That provides much room for Vietnam’s markets to develop further and opportunities for strong growth are huge,” said Marc Djandji, Head of Mekong Securities’ equities research.
Djandji added that local markets’ price-to-earnings ratio (P/E) in 2010 is 12, compared to 16.1 in Malaysia, 15.1 in Singapore, 13.8 in Indonesia, 13.1 in Philippines and 10.8 in Thailand. Vietnam’s price-to-book value (P/B) and price-to-cash flow (P/CF) are still below the ASEAN’s average rates.
“Therefore, Vietnam is still cheaper than other regional peers,” said Djandji. Hoang Xuan Quyen, a Deputy General Director with Tan Viet Securities Incorporated, said foreign investors were buying good Vietnamese shares at more reasonable prices. “Besides huge capital, they are upbeat Vietnam’s economic outlook,” said Quyen.