Vietnam stocks are bright spot as fed batters Southeast Asia

Aug 10th at 11:26
10-08-2015 11:26:04+07:00

Vietnam stocks are bright spot as fed batters Southeast Asia

Vietnam’s stocks will extend Southeast Asia’s best rally as plans to ease share-ownership limits and a strengthening economy lure foreign inflows, according to Asia Frontier Capital and Coeli Asset Management.

 

The benchmark VN Index has climbed 11 percent in 2015 to the highest in five years relative to the MSCI Southeast Asia Index, which has tumbled 12 percent. Even after the gains, the Vietnamese gauge is valued at an 18 percent discount to the MSCI regional measure. Foreigners have bought $223.1 million of the nation’s stocks this year through Aug. 6, heading for the 10th straight annual purchase.

While plunging commodity prices and the prospect of higher U.S. interest rates hammer shares from Indonesia to Thailand, frontier fund managers are more optimistic about the outlook for Vietnam, where the economy is growing at the fastest pace in two years and the ruling Communist Party is preparing to allow foreigners to increase stakes in certain industries.

“We are generally very positive for the market,” said Thomas Hugger, chief executive officer at Hong Kong-based Asia Frontier Capital. “We continue to buy Vietnamese stocks, since we see good economic figures coming out from Vietnam and at the same time the stock market is trading at a discount.”

The Vietnamese government is targeting economic growth of 6.2 percent in 2015, up from about 6 percent last year. Inflation has stayed below 1 percent in the first five months of the year, down from a peak of more than 28 percent in August 2008.

The VN Index trades at 12 times reported earnings, versus the MSCI Southeast Asia’s 14.7 multiple. The gauge rose 0.6 percent to 607.23 as of 10:06 a.m. local time today.

Key to growth

Regulators see foreign investment as one of the keys to growing the country’s stock market, where average daily trading volume on the main Ho Chi Minh City Stock Exchange is about one-10th that of Singapore, the region’s largest bourse. Vietnam is building a case for an upgrade to emerging-market status from frontier classification by MSCI Inc., the State Securities Commission said in October.

“The liberalisation of the foreign ownership limits is a hugely significant event for the development of Vietnamese capital markets,” said James Bannan, who runs the $130 million Frontier Markets Fund at Coeli in Sweden. “The next critical step in opening up the markets is for the government to sell down its ownership interest in a large number of listed companies. Governments are rarely good owners of companies.”

Bannan said he is continuing to add Vietnam stocks and prefers companies reliant on consumer spending.

The government issued a decree on June 26 to allow overseas investors to increase holdings in certain industries to 100 percent from a current cap of 49 percent.

Drawn-out process

For Project Asia Research & Consulting Pte., foreign investors may be deterred by the drawn-out process involved in companies getting approval to raise overseas ownership limits, while the continuing existence of state stakes or cross-shareholdings means minority investor rights will be limited.

“Reforms are done at a slow pace and there is still a fear that they can get reversed if there is a downturn in the economy or the stock market,” said Attila Vajda, managing director at Project Asia Research, a Singapore-based advisory firm.

The ownership-reform plan has been delayed since it was first proposed in 2013. Across the border in China, the ruling Communist Party has gone to extreme lengths to stop a $3.4 trillion equity rout from spilling into the wider economy, including banning selling by major shareholders and curbing short sales.

Ownership caps

Under Vietnam’s decree, to take effect in September, foreign holdings in sectors such as banks that are governed by separate ownership regulations will remain limited to 30 percent. A cap of 49 percent will apply to unspecified sectors. All other equities would have no limits, unless restricted by companies themselves. Guidelines will be issued this month, Vu Bang, chairman of the State Securities Commission said Aug. 6.

The government’s steps to open up its corporate sector, coupled with youthful demographics and cheap labor, makes the nation one of the most compelling frontier markets in the region, says Shamoon Tariq, a Stockholm-based money manager at Tundra Fonder, which has $225 million in assets under management.

The relaxation of ownership limits “is one step closer to an open-market mechanism foreigners like,” said Tariq, who said he’s continuing to buy the nation’s stocks. “It should attract international investors to a considerable degree.”

bloomberg



NEWS SAME CATEGORY

VN Index breaches 600-point benchmark

Local shares ended the weekend's early trading session with slight rise on both bourses.

Are billions of dollars heading for Vietnam from China?

Analysts have cautioned the public about assuming that billions of dollar worth of capital will come to Vietnam because of the Chinese stock market problems.

Shares recover as market sentiment improves

Shares recovered this morning after falling for three days, boosted by the rallies of several large-cap stocks.

Local markets end mixed in early trading

Local shares ended mixed this morning, with a positive performance on the northern bourse and an extended fall on the southern market.

Securities market needs restructuring to drive foreign capital, experts say

Viet Nam needs to accelerate the restructuring of the stock exchange by enhancing hedging instruments and diversifying products to drive more foreign capital into...

26 companies delisted in first half of 2015

The HCM Stock Exchange (HSX) and the Ha Noi Stock Exchange (HNX) delisted 26 companies, with 438 million shares, in the first six months of this year.

Selling power drags down VN Index

The rise in selling power and market caution made the VN Index on the HCM Stock Exchange lose 11.43 points, or 1.84 per cent, to close at 609.63 points.

Vietnam safe from China’s stock crash

Vietnam is hardly to be be affected by the Chinese stock market crash in the short-term, but experts have warned that it should take careful measures to protect its...

TPP stall could impact VN export stocks

Despite the progress made, the latest talks to secure the Trans Pacific Pact (TPP) have stalled.

Blue chips drag down VN-Index

Shares unexpectedly fell at the end of this morning's session, despite rising during most of the trading period. Blue chips were the main drag on the market.

TRENDING


MOST READ


Back To Top