Blue chips carry stock market to 10-year high

The VN-Index closed at 933 points last Thursday after a month-long rally buoyed by large inflows to blue chips, Photo: Le Toan

It has been another historic week for Vietnam’s stock market: the benchmark VN-Index closed at 933 points last Thursday, setting a 10-year peak. The rally, which has lasted for a month, helped the VN-Index expand by 13 per cent since the start of November. However, it is clear that this upward trend does not extend to all stocks in the market – in fact, the historic surge this month was mostly thanks to large inflows to select blue chips.

Vietnam Dairy Products JSC (VNM) rose by 23.49 per cent in November to reach VND184,200 ($8.10),Vingroup JSC (VIC) rose by 35 per cent to VND75,100 ($3.30), and FPT Corporation (FPT) settled at VND57,600 ($2.53) after a 16 per cent surge. All three of these stocks reached their one-year peak last week.

Hoang Thach Lan, head of Retail Research at Viet Dragon Securities, noted that most of the rise in November was restricted to the market’s top 15 stocks, which take up almost half of the market’s entire capitalisation. One reason for the prevailing optimism is the upcoming share sales held by the State Capital Investment Corporation (SCIC) for Binh Minh Plastics, Tien Phong Plastics, FPT Corporation, Vinaconex, and Domesco JSC, all scheduled for early December.

Similarly, Le Hong Lien, head of Institutional Research at Maybank Kim Eng Vietnam, said that the recent VN-Index hike is partly attributable to an increase of foreign capital into Vietnam’s blue chips, especially Vinamilk.

According to Lien, Singapore’s Jardine Cycle & Carriage (C&C) recently bought 10 per cent of Vinamilk for over $1 billion, about $397 million of which was given to SCIC in exchange for 48.3 million shares in the public auction two weeks ago. The remaining amount, which comes to more than $600 million, must have been paid to other foreign investors in the Vietnamese market, as Lien observed that total foreign ownership in Vietnam remains unchanged after the increased stake of Jardine C&C.

In other words, the analyst said that in the current uptrend, foreign investors disbursed the $600 million they received from Jardine C&C into other blue chips. This new influx of capital has boosted Vietnam’s major stocks, helping to increase the VN-Index.

“Other reasons include Vietnam’s stable macro-economics and low inflation rates. More money is also available in the market due to an increase in bank lending,” said Lien.

In particular, official reports show that Vietnam’s October exports grew 26.2 per cent year-on-year, marking the third consecutive month of growth above 20 per cent. Inflation is expected to hover around 3.5 per cent, still within the forecast range of the government.

Third-quarter GDP grew by 7.46 per cent year-on-year – an “impressive pace” according to HSBC. Foreign direct investments for the first 10 months of 2017 reached $28 billion, surpassing the 2017 target, while foreign reserves rose to $45 billion, a record high for Vietnam. Credit continued to grow well, expanding by 13.5 per cent in the first three quarters of 2017.

“We expect the market’s bull run to continue in the short-term, as investors are still buoyed by positive macro-economic growth, together with the loosening credit policies in Vietnam,” said Viet Dragon Securities’ Lan. The analyst suggested that investors consider undervalued mid-cap stocks in addition to the blue chips, which are likely to enter a bubble after a period of non-stop growth.