Clear skies for stock markets

Jan 5th at 09:04
05-01-2018 09:04:26+07:00

Clear skies for stock markets

After a busy 2017, foreign investors are gearing up for another eventful year on Vietnam’s fast-growing stock markets.

Spotlight on consumer goods, retail, and banking

The past twelve months have been a busy period for foreign investors in Vietnam. Major state divestments continued to take place, most notably the share sales of Sabeco last month and Vinamilk in November, both of which garnered significant attention from overseas investors. The two sales together earned $5.41 billion for the state budget, and introduced Thai Beverage and Jardine Cycle & Carriage as Sabeco and Vinamilk’s major shareholders, respectively.

In the past year, foreign investors have also been active in share sales of leading private firms. One attractive sector is retail, which is poised for growth thanks to Vietnam’s expanding middle class and stronger consumption power. In October, Vincom Retail, Vietnam’s largest operator of shopping malls, conducted the largest initial public offering (IPO) ever in the country, raising $740 million from a slew of investment funds. Notable buyers include Templeton Investments, HSBC Global Asset Management, Dragon Capital, Singapore’s sovereign fund GIC, and Genesis Investment Management.

FPT Retail, another leading retailer of consumer electronics, sold 30 per cent of its shares to Dragon Capital and VinaCapital. The of this deal was not disclosed. At the same time, Dragon Capital also spent another $10 million on 10 per cent of Mobile World Corporation, another major electronics retailer.

The banking sector is also shining bright. In August, leading commercial bank VPBank conducted its pre-IPO private sale for 78 foreign investors, adding $1.2 billion to its charter capital. After the sale and its subsequent IPO, VPBank is 22.34 per cent foreign-owned.

In the last two months of 2017, three major deals took place in the financial sector. First, PYN Elite Fund forked out $40 million for 4.99 per cent of TPBank’s shares, marking its first investment in a Vietnamese bank. VinaCapital, after years of staying away from the banking sector, also bought the same amount of shares for $11 million at Oriental Commercial Bank.

HDBank, a yet-to-be-listed commercial bank, held its share sale near the end of December and collected $300 million from 76 foreign investors, who altogether own 21.5 per cent of shares. Major names include investment funds and banks such as Credit Saison, Deutsche Bank AG, CAM Bank, Macquarie Bank, JPMorgan Vietnam Opportunities Fund, and RWC Frontier Markets Opportunity Master Fund.

Andy Ho, chief investment officer of VinaCapital, pointed out that Vietnam stands apart from other markets thanks to a stable macro-economy, a focus on global integration, and a sound monetary policy. According to the financier, these and other factors helped the benchmark gauge VN-Index rise by more than 43 per cent in the year through November.

“During this period, foreign investors have been net buyers of $1.2 billion of Vietnamese equities, spurred on by new listings from private companies, as well as an accelerated pace of equitisations of state-owned enterprises and the sale of government stakes in equitised companies,” Ho said.

Looking forward

After a successful 2017, investment funds are anticipating another landmark year for Vietnamese equities. A common theme is a continued focus on state divestments, major IPOs, and other private offerings. Funds, however, differ in strategy.

Vu Huu Dien, fund manager of Dragon Capital, stated that divestments and private listings will offer “once in a lifetime” investment opportunities for funds. In particular, the government is looking to raise up to $18 billion from earmarked divestment projects and IPOs, while private listings can offer another $2 billion worth of shares to investors.

“The pipeline suggests that banks and property companies will dominate upcoming listings and divestments,” said Dien. He viewed this move as positive, as these sectors fit well with Dragon Capital’s investment themes of Vietnam’s growing middle-class and rapid urbanisation.

In a recent note, Dien also expressed his hope that the foreign ownership limit at listed firms would be lifted soon, providing a strong catalyst for inbound capital and Vietnam’s upgrade to the emerging market status.

Analysts from Viet Dragon Securities highlighted that there will be 181 divestments and IPOs of state-owned firms in 2018, offering ample supply to foreign investors. The analysts believed that major state sales such as Airports Corporation of Vietnam, Petrolimex, and PetroVietnam Gas JSC will produce good results this year, as the government has gained experience from the large-scale Sabeco and Vinamilk sales last year.

Andy Ho from VinaCapital, meanwhile, said that the firm’s flagship fund Vietnam Opportunity Fund (VOF) will increase its exposure to private companies in Vietnam. In particular, VOF will boost its percentage of private equity from 8.1 per cent at present to 20 per cent over the next two years. The fund is currently reviewing “a dozen transactions” worth of $150 million, according to Ho.

“The opportunities in the market are exciting, and investors keen to participate in a high-growth market should certainly put Vietnam at the top of their lists to consider,” he added.

Vietnam Holding, another player in the Vietnamese market, wrote in a recent investor’s note that it will look closely at 70 mid-cap firms on the Ho Chi Minh City Stock Exchange, which are usually neglected in favour of blue-chip stocks. According to fund managers, these mid-cap stocks will offer the highest gains in the next three-to-five years.

Mid-cap stocks are 37 per cent less expensive than the 30 largest Vietnamese stocks, trading at only 11 or 12 times over their projected earnings. Investing in mid-caps is also a suitable option for a relatively modest investment fund like the $213 million Vietnam Holding, said the fund managers.

vir



NEWS SAME CATEGORY

Market continues winning march

Shares extended gains on the two national stock exchanges as rising capital inflow was poured into the banking and energy sectors on high Q4 earnings expectations...

VN-Index rises steadily on positive outlook

The VN-Index continued its winning march on Thursday morning, hitting over 1,015 points, up 0.93 per cent over Wednesday’s close.

Real estate and stock markets to rise above market in 2018?

Forecast to be in a finer state than in 2017, the Vietnamese economy in 2018 is expected to provide even more favourable conditions for foreign direct investment...

2017—A year of “firsts” for Vietnamese stock market

VIR put together a brief recap of the ten most noteworthy “ups-and-downs” of the Vietnamese stock market over the course of 2017, from the launching of a brand new...

VN-Index breaks 1,000 point level

The VN-Index broke the 1,000-point threshold on Wednesday, closing up 0.99 per cent at 1,005.67 points, despite increasing profit-taking pressure towards the end of...

Securities sector to grab investor interest in 2018

The securities market is likely to be the most attractive investment channel for investors in the Vietnamese economy this year, analysts say.

HNX hosts auctions worth $41.7 million in December

Total 169 million shares were sold out in 28 auctions of State capital in the Ha Noi Stock Exchange (HNX) in 2017, raising total capital of over VND2.6 trillion...

VN-Index breaks 1,000-point landmark

Viet Nam’s benchmark VN-Index broke the 1,000-point landmark on Wednesday morning, up 1.1 per cent, on the consensus of large-cap stocks.

Banks lead market upturn in 2018’s first trading day

Stocks ended the first trading day of 2018 in the green on the two national stock exchanges, reflecting investors’ optimism about the market outlook this year.

Top 3 industries gain highest profitability rates in 2017

Finance-banking, real estate-construction and consumer goods are three industries that gain the highest profitability in the securities market in 2017.

TRENDING


MOST READ


Back To Top