The VN Index has increased by 25 percent so far this year, turning Vietnam into the fastest growing market in South East Asia.
Foreign securities investors are making the biggest net purchase wave over the last five years. Observers say they have been attracted by the low stock prices and the government of Vietnam’s efforts to boost the economic growth.
According to Bloomberg, by May 28, foreign investment funds had had the net stock purchase volume worth $254 million, the highest level if compared with the same periods of the last five years. The foreign investors believe that the listed enterprises would have a better year 2013 thanks to the inflation rate and the capital cost decreases.
Bloomberg has quoted the Vietnam Depository Center’s statistics as reporting that “the number of accounts opened by foreign investors in the first four months of the year alone was higher than that of the whole year 2012.”
By April 30, 16,238 foreign investors had been granted accounts for making transactions in Vietnam, while the figure was 16,001 in the whole year 2012.
The foreign investors’ interest in Vietnam has reached the highest peak so far. Michael Kokalari, Head of the analysis division of Maybank Kim Eng in HCM City, said affirmed at lot of investors came to exchange views or called to the company.
The stock index upturn is seen in the context of the great efforts made by the Vietnamese government to improve the economic growth and settle the existing problems in the national economy.
The State Bank of Vietnam has slashed the ceiling interest rates eight times since early 2012. Meanwhile, the government has released the decision on setting up the Vietnam Asset Management Company VAMC, a super power which is believed to help settle bad debts.
Though the VN Index has been increasing steadily since the beginning of the year, the P/E (price per earning) of the shares belonging to MSCI Vietnam Index is now at 13.2 only, or 18 percent lower than the average level of the five biggest markets in the region.
Bloomberg has predicted that the profits of the companies in MSCI Vietnam Index would increase by 16 percent this year.
Meanwhile, Kokalari of Maybank Kim Eng Securities Company thinks the VN Index may reach 550 points by the end of the year, or 6.8 percent higher than the closing index of May 29.
The current VN Index is just equal to 50 percent of the highest level of 1,170.67 points it once reached in March 2007.
Deputy Prime Minister Nguyen Xuan Phuc said before the National Assembly’s on May 20 that the bad debt ratio of commercial banks had reached 4.51 percent by the end of March 2013, lower than the 7.8 percent by the end of 2012.
However, observers believe that the bad debt ratio could be as high as 10-20 percent.
Despite some worries, foreign investors still find it attractive to invest in Vietnamese stocks. Andy Ho from VinaCapital Investment Management said there has been no sign that prompts investors to stop buying, as the stock prices remain very attractive, while the macro economy gets stable and investors can expect positive things in the next six or 12 months.