Bourse ready to roar back into life

The once bloated market has slimmed down and is set to enjoy better health

The VN Index on February 22 closed at 687.1 points, down 128.93 points or 17 per cent on the week. The week set a year record for the biggest weekly losses and wiped out all of last year’s gains.

Equity strategists said while last week was extremely difficult after panicked local-selling which started with the central bank’s decision to withdraw VND 20.3 trillion ($1.3 billion) of liquidity from the system by issuing compulsory T-bills. Every small negative story is unduly seized upon as an example of disaster and gloom.
“Sit tight,” said Johan Kruimer, Ho Chi Minh City Securities Corporation’s (HSC) deputy CEO and head of brokerage service.

Dao Viet Truong, head of Hanoi Securities’ research team said that sudden heavily buying of bonds worth over VND1,000 billion ($62.5 million) by foreign investors [on February 21] signaled a shift to less risky assets, rather than equity.

“In the short-run, the market will continue its downtrend and investors should take the opportunity to restructure portfolios,” Truong said, after forecasting the VN Index would bottom out at 650 points.
Dickon Henry Verey, Mekong Securities’ head of trading, said market volatility meant it was close to rallying back.
“Today [February 22] we saw examples of local buying and if that buying continues to increase we think this market will turn sharply.”

Dickon added that by his estimates the market was now trading at 20X 2007 PE and was starting to look fairly reasonable.
“We might see it dip to 650 on the VN Index but then I expect a sharp rally that could well take us up to between 800-850. This would be a result of local buying and or a sustained foreign buy programme,” said Dickon.

Spencer White, Thien Viet Securities’ strategic advisor and board member, said the market was starting to see some bargains coming to light.
“Greater confidence and conviction will come once investors have seen the positive policy decisions from the State Bank. We expect State Bank announcements will be made soon,” said White.

Kevin Snowball, director of PXP Vietnam Asset Management Limited, said when the markets go quiet, it was generally positive for long-term development. “In any event, continued weakness in the market year-to-date is starting to make the market look more interesting, even selectively cheap,” he said.

Snowball said downside should be limited from here and would not be surprised if the authorities were ready to announce positive and far-reaching measures to restore confidence in the market before the end of the quarter.
Vietnam’s equity market is currently selling on 17.2 times 2008 earnings as of late January, according to a Merrill Lynch’ report.